2018 (7) TMI 764 - AT - Central Excise

CENVAT Credit - common inputs used in manufacture of dutiable as well as exempt goods - exempted goods i.e. Vanaspati/Refined Vegetable oil - no separate inventory and account of inputs used in the manufacture of dutiable and exempted final products had been maintained - Rule 57CC of the Central Excise Rules, 1944 - extended period of limitation - Held that - Appellant have reversed the Modvat credit on proportionate basis in respect of the said inputs used in the manufacture of exempted final product. It is not disputed that the appellant have also paid the interest on the reversed credit @24% per annum. At the relevant time, the entitlement of the appellants to reverse the credit to the extent of common inputs used in the manufacture of exempted final products was in doubt. However, subsequently Rule 57CCC was inserted in the Central Excise Rules, 1944 through Finance Act, 2010 for reversal of actual credit by the manufacturer availing the credit of specified duty in respect of inputs used for manufacture of final product, which are not chargeable to duty or chargeable to nil rate of duty by payment of amount equivalent to amount of credit attributable to inputs used in the manufacture of such final products - the said amendment was retrospective in nature and covers the impugned period in this appeal. Since the appellant have reversed Cenvat credit attributable to the common inputs used for manufacture of exempted final products and paid interest @24% per annum, the appellant has made met the requirement of scheme of retrospective amendment of Section 69(2) of the Finance Act, 2010 - the demand of 8% of the value of exempted goods is not sustainable and is accordingly set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 57CC of the Central Excise Rules, 1944 regarding payment on exempted goods.
2. Applicability of retrospective amendment through Finance Act, 2010 on Cenvat credit reversal.
3. Compliance with the statutory scheme for reversal of Cenvat credit on common inputs.

Issue 1: Interpretation of Rule 57CC:
The case involved a dispute over the application of Rule 57CC of the Central Excise Rules, 1944 concerning the payment obligation on exempted goods. The appellant processed raw vegetable oil to produce vanaspati ghee and refined vegetable oil, with soap stock/acid oil being a byproduct subject to duty. The department alleged that Cenvat credit availed on common inputs necessitated payment on exempted goods. Initially, a show cause notice was issued, leading to an order for recovery of a specific amount, which was later reduced by the Commissioner. The Tribunal upheld the decision, which was challenged by the department in the High Court.

Issue 2: Applicability of Retrospective Amendment:
The subsequent legal proceedings involved the applicability of a retrospective amendment introduced through the Finance Act, 2010. The amendment, Rule 57CCC, allowed for the reversal of actual credit by manufacturers for inputs used in the production of goods not subject to duty. The appellant argued that they had already reversed the Modvat credit and paid interest, citing the retrospective nature of the amendment. The Tribunal noted that the amendment covered the period in question, and the delay in filing the application was deemed condonable.

Issue 3: Compliance with Statutory Scheme:
The Tribunal considered the appellant's compliance with the statutory scheme for reversing Cenvat credit on common inputs. It was established that the appellant had reversed the credit and paid interest, aligning with the requirements of the retrospective amendment. Relying on a judgment by the Gujarat High Court, the Tribunal concluded that the appellant had met the obligations set forth in the scheme. Consequently, the demand for payment on exempted goods was deemed unsustainable and set aside, leading to the allowance of the appeal.

In conclusion, the judgment delved into the interpretation of Rule 57CC, the impact of the retrospective amendment, and the appellant's adherence to the statutory scheme for Cenvat credit reversal, ultimately resulting in the appeal being allowed.