2018 (2) TMI 1011 - AT - Central Excise

CENVAT credit - Rule 6(3) of the Cenvat Credit Rules, 2004 - Revenue is seeking to demand 5% of the value of the exempted goods in terms of Rule 6(3)(i) of the Cenvat Credit Rules whereas the appellant wished to reverse the amount in terms of Rule 6(3)(iii) of the Cenvat Credit Rules - Held that - Tribunal in the case of Mercedes Benz India (P) Ltd. 2015 (8) TMI 24 - CESTAT MUMBAI held that Revenue cannot enforce an option on them and it is their will to choose from the various options available under Rule 6(3) of the Cenvat Credit Rules. It is apparent that Revenue cannot enforce any option on the appellant. Accordingly the option exercised by the appellant cannot be discarded even if the same has been made after the clearance of the goods. Appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against demand of reversal of amount under Rule 6(3) of the Cenvat Credit Rules, 2004.

Analysis:
The appellant, M/s. Furnace & Foundry Equipment Co., appealed against the demand for reversal of an amount under Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant had availed Cenvat credit on services not exclusively used for manufacturing excisable goods, leading to a request to reverse 5% of the value of exempted goods cleared by them. Although separate accounts for common inputs were maintained, no separate accounts for common input services existed. The clearances of exempted goods were made on specific dates, while the option under Rule 6(3) and (3A) of the Cenvat Credit Rules was exercised later. The Revenue sought to demand 5% of the value of exempted goods under Rule 6(3)(i), while the appellant wished to reverse the amount under Rule 6(3)(iii). The appellant relied on a Tribunal decision to argue that the Revenue cannot enforce an option and it is their prerogative to choose from the available options under Rule 6(3) of the Cenvat Credit Rules.

The learned AR argued that since no option was exercised before the goods' clearances, the appellant could not choose any option of their preference. The Tribunal referred to a previous case involving Mercedes Benz India (P) Ltd., where it was established that the appellant had complied with the conditions prescribed under Rule 6(3)(ii) and (3A) of the Cenvat Credit Rules. The Tribunal emphasized that the objective of Rule 6 was to prevent the availing of Cenvat Credit for input or input services used in manufacturing exempted goods. It was noted that none of the options in sub-rule (3) of Rule 6 provided for an automatic application if no option was chosen at a specific time. Therefore, the Tribunal concluded that Revenue could not insist on the appellant following a particular option under Rule 6.

Ultimately, the Tribunal held that Revenue could not enforce any option on the appellant, and the option exercised by the appellant could not be disregarded even if it was made after the goods' clearance. Consequently, the impugned order was set aside, and the appeal was allowed. The judgment was pronounced in court on a specified date.