2018 (6) TMI 245 - AT - Central Excise

CENVAT credit - demand of 6% of the value of exempted goods (waste cleared at nil rate of duty) - manufacture of dutiable as well as exempted goods - non-maintenance of separate records of inputs - Rule 6(3) of the Cenvat Credit Rules, 2004 - CBEC Circular No. 845/3/2007-CE dated 01.02.2007 - Held that - The case of the Appellant is that they are availing proportionate cenvat credit at the end of the month. The said fact was bought in the knowledge of the adjudicating authority but the adjudicating authority has not given any heed to consider the same and in casual manner the adjudicating authority passed the order - the ld. Commissioner (A) has not given any finding to the claim made by the appellant that they are availing proportionate cenvat credit of inputs used in manufacture goods at the end of the month. It is required to be examined by the authorities below whether the appellant is availing proportionate cenvat credit of inputs at the end of the month which has been used in manufacture of dutiable goods and the same has not been denied by the authorities below - appeal allowed by way of remand.

Issues:
1. Demand confirmed against the appellant for not maintaining separate account of inputs for dutiable and exempted goods.
2. Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004.
3. Interpretation of Circular No. 845/3/2007-CE dated 01.02.2007.
4. Adjudication of whether the appellant availed proportionate cenvat credit for inputs used in the manufacture of dutiable goods.

Analysis:

Issue 1: The appellant contested a demand confirmed against them for not maintaining separate accounts of inputs for dutiable and exempted goods. The appellant, a manufacturer of Grey Cotton Textile Yarn, faced the demand due to not segregating inputs used in the manufacture of different goods. The show cause notice alleged a lack of separate accounts, leading to the demand, interest, and penalty. The appellant challenged this demand.

Issue 2: Rule 6(3) of the Cenvat Credit Rules, 2004, was cited as the basis for the demand against the appellant. The rule mandates payment of an amount equal to 6% of the value of waste cleared at a nil rate of duty in cases where separate accounts of inputs are not maintained for dutiable and exempted goods.

Issue 3: The Circular No. 845/3/2007-CE dated 01.02.2007 was pivotal in the case. The circular addressed situations where manufacturers cannot practically segregate inputs for dutiable and exempted goods. It allowed for proportionate input credit on inputs used in the manufacture of finished goods cleared on payment of duty, without the need for immediate segregation or separate accounts.

Issue 4: The appellant asserted compliance with Circular No. 845/3/2007-CE dated 01.02.2007 by availing proportionate cenvat credit at the end of the month. The appellant argued that the authorities failed to consider this fact, leading to the unjust demand. The appellate authority found merit in the appellant's claim, stating that if the appellant availed proportionate credit for inputs used in dutiable goods, the demand for 6% of waste cleared at nil rate of duty was unwarranted. Consequently, the impugned order was set aside, allowing the appeal with consequential relief.

In conclusion, the judgment revolved around the appellant's compliance with rules regarding maintaining separate accounts for inputs and the application of Circular No. 845/3/2007-CE dated 01.02.2007 in cases of common inputs for dutiable and exempted goods. The appellate tribunal ruled in favor of the appellant, emphasizing the importance of considering proportionate cenvat credit availed by the appellant in determining the liability for payment demanded by the authorities.

← Previous Next →