2018 (10) TMI 149 - AT - Central Excise

Penalties - CENAVT Credit - common inputs used in manufacture of taxable as well as exempt goods - electricity, bagasse and press-mud - Rule 6(3) of the Cenvat Credit Rules - Held that - The issue is no more res-integra and it stands held in number of decisions that reversal of Cenvat Credit would not require invocation of the provisions of Rule 6(3) - Hon ble Supreme Court in the case of Union of India vs. DSCL Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT has held that in the case of emergence of bagasse and press-mud there is no requirement of reversal of Cenvat Credit, inasmuch as the same are not manufactured products. The appellant is not contesting the said reversal and the same is upheld - however penalties are set aside - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of Rule 6(3) of the Cenvat Credit Rules regarding payment liability for exempted goods.
2. Imposition of penalties on the assessee for reversal of Cenvat Credit.
3. Applicability of previous decisions and Supreme Court ruling on reversal of Cenvat Credit for exempted goods like bagasse and press-mud.

Analysis:
1. The judgment dealt with the interpretation of Rule 6(3) of the Cenvat Credit Rules concerning the payment liability for exempted goods such as electricity, bagasse, and press-mud. The Revenue contended that a payment of 10% of the value of such products was necessary due to availing Cenvat Credit for common inputs. However, the appellant argued that since they had reversed the proportionate Cenvat Credit related to exempted goods, no further payment was required. The Adjudicating Authority accepted the appellant's stance and dismissed the duty demand but imposed penalties equivalent to the reversed Cenvat Credit amount, which the appellant contested as being unjustified.

2. Regarding the imposition of penalties, the appellant clarified that the reversal of credit was done before the show cause notice was issued, in compliance with the provisions of sub Rule (3A) of Rule 6. The Tribunal found merit in the appellant's argument and ruled that penalties were unwarranted in this case, as the reversal of credit was in accordance with the rules.

3. The judgment referred to various decisions and a Supreme Court ruling to support the appellant's position on the reversal of Cenvat Credit for exempted goods. It cited cases such as Rajasthan Prime Steel Processing Centre Private Limited vs. CCE & ST, Oberoi Rajvilas and Ors. vs. CCE, and Mercedes Benz India (P) Limited vs. Commissioner of Central Excise to establish that the reversal of credit sufficed without invoking Rule 6(3). Additionally, the Supreme Court ruling in Union of India vs. DSCL Sugar Ltd. clarified that for products like bagasse and press-mud, no reversal of Cenvat Credit was required as they were not manufactured products. The Tribunal upheld the reversal of credit by the appellant and set aside the penalties imposed, ultimately allowing the assessee's appeal and rendering the Revenue's appeal moot.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision on each aspect of the case.