2018 (6) TMI 1248 - AT - Central Excise

Reversal of CENVAT Credit - Rule 6(3) of CCR, 2004 - manufacture of taxable as well as exempt goods - non-maintenance of separate records - Held that - It is admitted fact that the appellants have reversed the proportionate Cenvat credit attributable to the turnover of natural gas an exempt product on 1st Sept. 2014 and 24th Jan. 2015. As regards the retrospective effect of the amended provisions under Rule 6(3), with effect from 1.3.2016, which enables an assessee to reverse the proportionate credit attributable to exempt turn over, the same stands adjudicated in favour of the assessee by Hon ble Gujarat High Court in CCE Vs. Rituraj Holdings Pvt. Ltd. 2013 (2) TMI 34 - GUJARAT HIGH COURT , wherein the Hon ble High Court have held that the provisions for reversal are retrospective or sub-rule 7 of Rule 6 have got retrospective effect. Demand set aside - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Appeal regarding demand of Cenvat credit under Rule 6(3) of CCR, 2004 for exempted goods clearance.

Detailed Analysis:

1. Identification of Issue:
The appeals involve the demand of Cenvat credit under Rule 6(3) of CCR, 2004 for exempted goods clearance by M/s Oil India Ltd., a Public Sector Undertaking.

2. Factual Background:
M/s Oil India Ltd. produces natural gas and condensate (crude oil), with natural gas being exempt from duty and condensate being dutiable. The appellant availed Cenvat credit on service tax paid for repairs and maintenance services.

3. Revenue's Position:
Due to the lack of separate records as mandated by Rule 6(2) of CCR, 2004, the Revenue contended that M/s Oil India Ltd. should pay an amount under Rule 6(3) on the value of exempted goods clearance.

4. Demand and Orders:
The demand was calculated based on the value of exempted natural gas and excisable condensate cleared during specific periods. The demand under Rule 6(3) was confirmed for a certain period, while it was dropped for an earlier period due to a legislative change.

5. Appellants' Arguments:
The appellants contended that they had already reversed the proportionate Cenvat credit related to exempted turnover based on court orders. They relied on precedents from the Rajasthan High Court and the Gujarat High Court regarding the retrospective effect of Rule 6(3) amendments.

6. Tribunal's Decision:
After considering the arguments, the Tribunal found in favor of the appellants. Citing legal precedents, the Tribunal concluded that the issue was settled in favor of the assessee. The Tribunal allowed the appeals, set aside the demand under Rule 6(3), and revoked the imposed penalty, granting the appellants consequential benefits.

7. Conclusion:
The Tribunal's decision was based on the retrospective effect of Rule 6(3) amendments and the appellants' compliance with court orders in reversing the proportionate credit. The judgment provided relief to the appellants by overturning the demand and penalty imposed by the Revenue.

This detailed analysis summarizes the key aspects of the legal judgment regarding the demand of Cenvat credit under Rule 6(3) of CCR, 2004 for exempted goods clearance by M/s Oil India Ltd.