2018 (1) TMI 481 - AT - Central Excise

CENVAT credit - input/input services - non-maintenance of separate records - whether the appellant herein had followed the provisions of Rule 6(3) and (3A) of the said Rules correctly or otherwise? - Held that - the provisions of Rule 6(3) specifically indicate that an assessee if he is opting not to maintain separate account shall follow the options given under the said sub-rule - In the case in hand, the appellant herein had exercised their option of not maintaining separate account and following the option of payment of an amount as determined under sub-rule (3A). The said sub-rule (3A) specifically lays down the procedure that needs to be followed by the assessee and the one of the main procedures is in clause (a) wherein an option needs to be exercised by the manufacturer/assessee - In the case in hand, the appellant herein had exercised this option on 7th October 2013 itself - On careful perusal of the provisions of Rule 6(3A) of the said Rules, I do not find any requirement of filing of an intimation every year. Both the lower authorities have not disputed the calculation done by the appellant in the case in hand. Having not disputed the said calculation and there being no contest to such reversal undertaken by the appellant confirming the demand of an amount of equivalent to 6% of the value of the trading activity only on the ground that the appellant has not filed the intimation every year seems to be not in consonance with the law and needs to be set aside. Appeal allowed.

Issues:
1. Interpretation of Rule 6(3) and Rule 6(3A) of the Cenvat Credit Rules, 2004 regarding maintaining separate accounts and payment options.
2. Compliance with the procedural requirements under Rule 6(3A) for reversing cenvat credit attributable to trading activities.
3. Dispute over the necessity of filing intimation every year for exercising the option under Rule 6(3A).
4. Calculation and reversal of the amount attributable to exempted goods in monthly returns.
5. Validity of the demand raised of an amount equivalent to 6% of the value of trading activity due to alleged non-compliance.

Analysis:
1. The case involved a manufacturer of excisable goods engaged in trading activities who availed cenvat credit for inputs and input services common to both manufacturing and trading. The issue was whether the appellant correctly followed the provisions of Rule 6(3) and Rule 6(3A) of the Cenvat Credit Rules, 2004.

2. The appellant had filed an intimation under Rule 6(3A) regarding not maintaining separate accounts and had reversed the cenvat credit proportionate to trading activities in monthly returns. The appellant argued compliance with the procedure, citing the case of Mercedes Benz India (P) Ltd. vs. CCE, Pune-I. The departmental representative contended non-compliance due to lack of separate accounts and failure to exercise the option under Rule 6(3A) as required.

3. The main contention revolved around the necessity of filing the intimation every year for exercising the option under Rule 6(3A). The Tribunal found no such requirement in the rules and criticized the lower authorities for misinterpreting this aspect. The Tribunal held that the appellant's initial exercise of the option sufficed without annual filings.

4. The Tribunal noted that the appellant correctly followed the procedures under Rule 6(3A) by calculating and reversing the amount attributable to exempted goods in monthly returns. Both lower authorities did not dispute this calculation, leading the Tribunal to question the validity of the demand raised solely on the grounds of alleged annual filing non-compliance.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief, highlighting the misdirection by the lower authorities in interpreting the filing requirements under Rule 6(3A) and the lack of dispute regarding the reversal calculations made by the appellant.

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