2017 (11) TMI 530 - HC - Central Excise

CENVAT credit - Whether the Hon ble CESTAT is correct in dropping demand of Cenvat Credit on common inputs issued under Section 11A of the Central Excise Act, 1944 read with Rule 6 & 12 of erstwhile Cenvat Credit Rules, 2002 for having not maintained separate accounts as mandated statutorily by law? - Held that - both the authorities has gone into detail regarding the point which has been canvassed by counsel for the appellant and that statement recorded by Director Deepak Hazara was also considered by the authority in detail and he has not disputed the same during the audit which was conducted from the 14th July, 2004 to 19th July, 2004. Taking into consideration concurrent finding of both the authorities, we see no substantial question of law arises in the appeal - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Whether the CESTAT was correct in dropping the demand for Cenvat Credit on common inputs under Section 11A of the Central Excise Act, 1944 read with Rule 6 & 12 of the erstwhile Cenvat Credit Rules, 2002.
2. Whether the assessee maintained separate accounts as mandated by law.

Issue-wise Detailed Analysis:

1. Demand for Cenvat Credit on Common Inputs:

The department scrutinized the invoices and records of the assessee for the period April 2003 to June 2004 and observed that the assessee cleared goods at Nil rate of duty along with dutiable products. The goods were manufactured using Cenvatable inputs without maintaining separate accounts as required by Rule 6 of the Cenvat Credit Rules, 2002. Consequently, the department initiated proceedings to recover ?22,14,730/- along with interest and penalty. The adjudicating authority confirmed the demand, stating that the assessee contravened Rule 6 by not reversing or paying the amount equal to 8% of the total price of the exempted goods at the time of clearance. The authority also imposed penalties under Section 11AC of the Central Excise Act, 1944, and Rule 13(2) of the Cenvat Credit Rules, 2002.

2. Maintenance of Separate Accounts:

The Commissioner (Appeals) overturned the adjudicating authority's order, noting that the assessee had submitted evidence of maintaining separate accounts for exempted and dutiable goods. The Commissioner found that the adjudicating authority did not provide clear findings to refute the assessee's claims. The Commissioner concluded that the demand was not sustainable as the provisions of Rule 6(3) of the Cenvat Credit Rules, 2002, were not applicable since the assessee maintained separate accounts.

The CESTAT upheld the Commissioner (Appeals) order, stating that the adjudicating authority failed to provide clear reasons for rejecting the assessee's claim of maintaining separate accounts. The CESTAT noted that the department did not produce any evidence to counter the findings of the Commissioner (Appeals).

High Court's Judgment:

The High Court reviewed the concurrent findings of the Commissioner (Appeals) and the CESTAT. The court observed that both authorities had thoroughly examined the evidence, including the statement of the authorized representative, which indicated that separate records were maintained. The court found no substantial question of law arising from the appeal and dismissed it, affirming the decisions of the lower authorities.

Conclusion:

The High Court concluded that the assessee maintained separate accounts for inputs used in the manufacture of dutiable and exempted goods, and thus, the provisions of Rule 6(3) of the Cenvat Credit Rules, 2002, were not applicable. The demand for Cenvat Credit and the associated penalties were not sustainable. The appeal was dismissed for lack of merit.