2018 (3) TMI 322 - AT - Central Excise

CENVAT credit - rule 6(3) of CENVAT Credit Rules, 2004 - Held that - the credit of duty had not been taken on inputs/input services used for exempt product and, therefore, they were in full accord with rule 6(1) of CCR, 2004; the prescriptions in rule 6(3) of CCR, 2004 are, therefore, not required to be complied by the appellant. However, as the two lower authorities had not ascertained the veracity of the claim that credit had been reversed, the matter needs to be decided afresh - appeal allowed by way of remand.

Summary

Issues:
1. Availment of CENVAT credit on goods and services for exempt and dutiable pharmaceutical products.
2. Upholding of recovery order by the adjudicating authority.
3. Compliance with rule 6(3) of CENVAT Credit Rules, 2004.
4. Verification report by the jurisdictional range Superintendent.
5. Remand for fresh consideration based on the claim of reversal of credit.

Analysis:
1. The appellant, a manufacturer of exempt and dutiable pharmaceutical products, faced proceedings for recovery of CENVAT credit amounting to &8377;3,33,249/- for the period from 1st April 2011 to 31st March 2012. The order-in-appeal upheld the recovery ordered by the adjudicating authority.

2. The appellant argued that they could not segregate raw materials at the time of receipt but reversed appropriate credits at the time of issue for manufacturing. They contended that this practice aligned with the Supreme Court rulings in Chandrapur Magnet Wires (P) Ltd and Commissioner of Central Excise v. Bombay Dyeing & Mfg Co Ltd. They also claimed that the lower authorities did not provide them with an opportunity to counter the verification report used to confirm the demand.

3. The Authorized Representative supported upholding the demand of duty, citing non-compliance with rule 6(3) of CENVAT Credit Rules, 2004 by the appellant.

4. The Tribunal noted that the appellant's claim implied they did not take credit on inputs for exempt products, thus complying with rule 6(1) of CENVAT Credit Rules, 2004. However, as the lower authorities did not verify the reversal of credit claimed by the appellant, the matter required fresh examination.

5. The Tribunal directed the original authority to notify the appellant about any verification report used against them and remanded the matter for reconsideration. The decision emphasized that subsequent reversal of credit equates to not availing CENVAT credit, as per the Supreme Court's stance.

This detailed analysis highlights the key arguments, legal provisions, and directions provided in the judgment, ensuring a comprehensive understanding of the case and its implications.