2018 (3) TMI 398 - AT - Central Excise

Reversal of CENVAT credit - Rule 6 (3) (b) of CCR - it was alleged that M.S Coils/ HR sheets used for manufacture of such pipes were exclusively used for manufacture of exempted final products being of specific grade and were even separately stored hence could not be treated as common input used for manufacture of dutiable or exempted goods - Held that - as far as demand of cenvat credit of 1, 01, 25, 986/- is concerned the Appellant has already reversed the 8%/10% amount on the value of exempted goods in terms of Rule 6 (3). We find that even though the inputs has been exclusively used in exempted goods the assessee cannot be forced not to pay the amount in terms of Rule 6 (3) and instead reverse the credit. Further it is to be seen that apart from said input i.e HR Coils and MS Plates the Appellant has used common inputs i.e welding electrodes welding wires flux oxygen gas grinding wheels etc. in manufacture of exempted goods and thus reversed the amount in terms of Rule 6 (3) (b). In such circumstances it cannot be said that all the inputs are for exclusive use in exempted final products. The Rule 6 (1) and Rule 6 (3) (b) both cannot be applied in case of such clearances. Demand of 64, 40, 555/- made on the ground that they have used common inputs and hence liable to pay 8%/10% amount in terms of Rule 6 (3) (b) eventhough they have maintained the separate account and the proportionate credit was reversed by them at the time of clearance - Held that - where the Appellant has reversed the proportionate credit and has also maintained separate accounts of inputs used in such exempted goods they cannot be forced to pay the amount in terms of Rule 6 (3) (b). It is apparent from the record that the major item i.e MS Plates and HR sheets account was separately maintained and in case of common inputs the credits were proportionately reversed. Further in terms of retrospective amendment to rule 6 of the Cenvat Credit Rules by Section 73 of the Finance Act 2010 as long as the assessee reverses the proportionate cenvat credit the same is considered as sufficient compliance with Rule 6 - demand not sustainable. Demand u/s 11D - Held that - the show cause notice has nowhere alleged that the said amount has been represented as excise duty by the Appellant. Hence the Board Circular No.599/36/2001-CE dt. 12.11.2001 is not applicable - demand not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of cenvat credit disallowance, demand and recovery of amounts, applicability of Rule 6 (3) of Cenvat Credit Rules, demand under Section 11D, proportionate reversal of credit on consumables.

Analysis:
1. The case involved the disallowance of cenvat credit amounting to a significant sum due to the appellant's use of inputs exclusively in exempted goods. The appellant had reversed a portion of the credit based on Rule 6 (3) of the Cenvat Credit Rules. The appellate tribunal found that the appellant had correctly reversed the credit and maintained separate accounts for common inputs, thereby ruling the demand unsustainable. The tribunal cited relevant case law and held in favor of the appellant.

2. Another issue addressed was the demand for recovery of amounts based on the use of common inputs and the reversal of proportionate credit by the appellant. The tribunal noted that the appellant had maintained separate accounts and reversed credits accordingly. The retrospective amendment to Rule 6 of the Cenvat Credit Rules was also considered, leading to the tribunal ruling the demand under Rule 6 (3) (b) as unsustainable against the appellant. Relevant judgments and legal provisions were cited to support this decision.

3. The demand under Section 11D, concerning the recovery of 8/10% amounts from customers, was also deliberated. The tribunal referenced previous judgments to conclude that the demand against the appellant was not sustainable. It was noted that the show cause notice did not allege that the amount was represented as excise duty, leading to the tribunal ruling in favor of the appellant.

4. The tribunal's comprehensive analysis and consideration of submissions from both parties resulted in the conclusion that the demand and penalty against the appellant were not sustainable. As a result, the appeal was allowed, providing consequential reliefs to the appellant. The judgment was pronounced on 31/01/2018, bringing a favorable resolution to the legal dispute.