2018 (6) TMI 1295 - AT - Central Excise

CENVAT credit - common input services which are used for trading activities - Rule 6 (3) (1) of CENVAT Credit Rules, 2004 - Held that - It is well settled that when an assessee manufactures both dutiable and exempted goods and the credit taken on inputs used in the manufacture of exempted goods and is reversed with interest, then the question of payment of amount of 8%/6%/7% of the value as per Rule 6(3)(i) of the CENVAT Credit Rules does not arise in law. The appellants have not even taken the CENVAT credit on that portion of input services which were attributable to trading/exempted category and the same is evident from the intimation letter dated 27.08.2014 and the calculation sheets attached thereto - the question of paying amount as per Rule 6(3)(i) does not arise in law and the impugned order is not sustainable in law. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of CENVAT credit on common input services used for trading activities.

Analysis:
The appellant, engaged in manufacturing excisable goods and providing taxable output services, faced a dispute regarding availing CENVAT credit for common input services used for trading activities. The Department alleged that the appellant was availing credit on input services used for trading, triggering a show-cause notice. The Original Authority upheld the demand, imposing penalties. The appellant contended they maintained separate records for inputs exclusively used in manufacturing and trading. The appellant argued they did not avail credit for trading activities, complying with Rule 6(3A) of CENVAT Credit Rules. The Commissioner rejected the appeal, leading to the present appeal.

The appellant argued that the impugned order failed to consider facts and law. They had informed the Department about not availing credit for trading activities. The appellant claimed proportionate credit for manufacturing dutiable goods and followed Rule 6(3A) for common input services related to dutiable activity. The Commissioner's rejection based on non-filing of intimation under Rule 6 was challenged. The Tribunal noted the appellant's intimation to claim CENVAT on common input services and compliance with Rule 6(3A). Referring to precedents, the Tribunal held non-filing of intimation as a procedural irregularity not hindering credit reversal. It clarified that payment under Rule 6(3)(i) did not apply when credit on exempted goods was reversed. The Tribunal found the appellant did not avail credit for trading/exempted services, supported by the intimation letter and calculations. Consequently, the Tribunal set aside the impugned order, allowing the appeal.