2017 (9) TMI 1248 - AT - Central Excise

CENVAT credit - manufacture of taxable as well as exempt goods - non-maintenance of separate records - Rule 6 (3) (a) of CCR, 2004 - case of appellant is that they have reversed more than the credit than what ought to have been paid by them as per Rule 6 (3) (a) of CCR, 2004, therefore nothing further is required to be paid by them in terms of reversal of cenvat credit. Held that - It is consistently agreed upon in the SCNs that the appellants had reversed such credit, however, while considering the input credit for reversal, the notices had omitted to consider input service credit reversed, and hence, the credit actually reversed by the appellants has not been calculated correctly. Now the Ld. Advocate avers that the appellant has reversed much more than that required to be reversed by them in the impugned period under Rule 6 (3) (a) of the Rules - such an averment would require to be verified - for the limited purpose for causing verifying the claim of the appellant that the entire quantum of Cenvat credit required to be reversed as indeed been reversed, the matter is remanded for denovo adjudication. Penalty u/r 15 of CCR - Held that - Rule 15 of the said Rules contains provisions for confiscation and penalty in cases where Cenvat credit in respect of input or capital goods or input services has been taken or utilized wrongly - During the impugned period, provision for imposition of penalty equal to the wrongly taken or used cenvat credit was applicable when such credit was taken or utilized wrongly by reason of fraud, collusion, or willful mis-statement or suppression of facts or contravention of concerned statutory provisions with intent to evade payment of service tax - There is no allegation of suppression or fraud, collusion, willful mis-statement either in the SCNs or in the impugned orders - penalties set aside. Appeal allowed by way of remand.

Summary

Issues:
- Availing Cenvat credit on inputs and input services for manufacturing both dutiable and exempted/non-excisable goods.
- Allegations of not maintaining separate accounts for dutiable and exempted goods.
- Issuance of three Show Cause Notices (SCNs) proposing penalties under Rule 15 of Cenvat Credit Rules 2004.
- Confirmation of duty demands, interest, and penalties by the Department.
- Appeals filed against the orders.
- Arguments regarding reversal of credit, input services credit, and penalty imposition.
- Verification of the claim of reversing the required Cenvat credit.
- Penalty imposition under Rule 15 of CCR 2004.
- Applicability of penalty provisions for wrongly taken or utilized credit.
- Lack of fraud, collusion, willful misstatement, or suppression of facts.
- Setting aside of penalties imposed in the impugned orders.

Analysis:
The judgment by the Appellate Tribunal CESTAT Chennai involved a case where the appellants were availing Cenvat credit on inputs and input services for manufacturing both dutiable and exempted/non-excisable goods without maintaining separate accounts. Three SCNs were issued proposing penalties under Rule 15 of Cenvat Credit Rules 2004 for not correctly reversing the attributable credit on inputs used in manufacturing exempted products. The duty demands, interest, and penalties were confirmed by the Department, leading to the filing of appeals by the appellants. The arguments presented focused on the reversal of credit, input services credit, and the imposition of penalties. The Tribunal noted discrepancies in the calculation of reversed credit and remanded the matter for verification of the appellant's claim. It was clarified that if the required credit had been correctly reversed, no further demand would arise. The judgment referenced previous court decisions to support this stance.

Regarding the penalty imposition, the Tribunal found that the penalties equal to tax liability imposed under Rule 15 of CCR 2004 could not be sustained. It was highlighted that the penalties were proposed without specific allegations of fraud, collusion, or willful misstatement, which are necessary for penalty imposition under the rule. As there was no evidence of such misconduct, the penalties were set aside. Ultimately, the appeals were allowed for remand purposes as specified in the judgment, and both appeals were disposed of accordingly.