2018 (10) TMI 956 - AT - Central Excise

CENVAT Credit - common inputs used in manufacture of both dutiable as well as exempted goods - non-maintenance of separate records - demand of 5%/6% on the value of exempted goods - Rule 6(3)(b) of Cenvat Credit Rules, 2004 - Held that - As the appellant has already reversed the Cenvat credit attributable to the exempted goods on inputs used in manufacturing of SLICE during the intervening period. In that circumstances, the same is equal to compliance of the Rule 6 (3) of the Cenvat Credit Rules, 2004 as they have not availed Cenvat credit on inputs used in manufacturing of exempted goods - Therefore, an amount equal to 5%/6% of the value of exempted goods can t be demanded and benefit of Notification No. 1/2011-CE dated 01.03.2011 cannot be denied to the appellant. Demand of Interest - Held that - The matter requires verification at the end of the adjudicating authority, therefore, for the limited purpose, the matter is remanded back to the adjudicating authority for calculation of interest - Matter on remand. Penalty - Held that - Admittedly, during the impugned order, there was a dispute going on whether the appellant is manufacturing exempted goods or not, in that circumstances, no penalty is imposable to the appellant - penalty set aside. Appeal allowed by way of remand.

Summary

Issues:
1. Availment of Cenvat credit on inputs used in the manufacture of exempted goods.
2. Requirement to pay 5%/6% on the value of exempted goods.
3. Compliance with Rule 6(3)(b) of Cenvat Credit Rules, 2004.
4. Dispute regarding dutiable and exempted goods.
5. Reversal of Cenvat credit on inputs used in manufacturing of exempted goods.
6. Benefit of Notification No. 1/2011-CE dated 01.03.2011.
7. Calculation of interest.
8. Imposition of penalty.

Analysis:
1. The appellant availed Cenvat credit on inputs used in the manufacture of exempted goods, specifically "SLICE," a pulp-based product. The issue arose when it was found that the appellant did not pay the required 5%/6% on the value of exempted goods during a certain period. The appellant was manufacturing both dutiable and exempted goods without maintaining separate accounts as per Rule 6(3)(b) of Cenvat Credit Rules, 2004.

2. The dispute centered around whether "SLICE" was exempt from duty or not. After a show cause notice, it was determined that "SLICE" is indeed an exempted good. The appellant reversed the Cenvat credit availed on inputs used in "SLICE" production along with interest. The appellant argued that they should not be required to pay the 5%/6% amount for the specified period and should benefit from Notification No. 1/2011-CE dated 01.03.2011.

3. The Tribunal found that the appellant's compliance with Rule 6(3)(b) was met as they had reversed the Cenvat credit related to exempted goods during the period in question. Therefore, the demand for the 5%/6% amount was deemed unsustainable, and the benefit of the mentioned notification could not be denied.

4. Regarding interest calculation, the matter was remanded back to the adjudicating authority for verification, with the appellant directed to cooperate. The appellant was also instructed to appear before the authority for interest calculation within a specified timeframe.

5. The Tribunal noted that since there was a dispute regarding the manufacturing of exempted goods, no penalty was imposed on the appellant. As a result, the penalty was set aside, and the appeal was disposed of by way of remand for further proceedings.