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2018 (12) TMI 244 - AT - Central ExciseCENVAT Credit - common input services like security service, GTA service and Manpower Service which were used in the manufacture of excisable goods as well as in the provision of exempted service viz., job work and also sales - Rule 6(3) of the CENVAT Credit Rules, 2004 - compliance of provisions of Rule 6(3A) - Held that - The appellant has already reversed proportionate CENVAT credit on 13.5.2015 whereas the show-cause notice was issued on 22.1.2016 - once the appellant has made the reversal of proportionate credit then it is sufficient compliance of the provision of Rue 6(3A). Division Bench of this Tribunal in the case of Cranes & Structural Engineers 2016 (8) TMI 387 - CESTAT BANGALORE has held that the condition in Rule 6(3A) to intimate the Department is only a procedural one and that such procedural lapse is condonable and denial of substantive right on such procedural failure is unjustified. Credit allowed - appeal allowed - decided in favor of appellant.
Issues:
1. CENVAT credit availed on common input services used for both dutiable and exempted activities. 2. Applicability of Rule 6(3) of the CENVAT Credit Rules, 2004. 3. Demand of 6% on the value of exempted sales/services. 4. Compliance with Rule 6(3A) regarding reversal of proportionate credit. 5. Legal sustainability of the impugned order by the Commissioner (A). Issue 1: CENVAT Credit on Common Input Services The appellant availed CENVAT credit on common input services used for both manufacturing excisable goods and providing exempted services. The appellant did not maintain separate accounts for these activities, as required by Rule 6(2) of the CENVAT Credit Rules, 2004. Consequently, the appellant was found liable to pay an amount equal to 6% of the value of exempted services under Rule 6(3)(i) of the Rules. Issue 2: Applicability of Rule 6(3) The demand for payment under Rule 6(3) was based on the appellant's failure to maintain separate accounts for dutiable and exempted activities. The Joint Commissioner confirmed the demand for duty, interest, and imposed a penalty under Rule 15(2) of the CENVAT Credit Rules, 2004. However, the demand of 6% on job work charges was dropped. The appellant challenged this decision before the Commissioner (A). Issue 3: Demand of 6% on Exempted Sales/Services The appellant was required to pay 6% on the value of exempted sales and services, amounting to a total of &8377; 13,63,818 for the period 2013-14 and 2014-15. The show-cause notice issued to the appellant demanded duty, interest, and proposed penalties under the relevant provisions of the Central Excise Act, 1944. Issue 4: Compliance with Rule 6(3A) The appellant argued that the reversal of proportionate credit along with interest before the issuance of the show-cause notice constituted sufficient compliance with Rule 6(3A). The appellant relied on various judicial precedents to support this argument, emphasizing that the reversal of credit amounted to non-availment of credit, rendering the demand under Rule 6(3)(i) unsustainable. Issue 5: Legal Sustainability of the Impugned Order The appellant contended that the impugned order was not sustainable as it failed to appreciate the facts and binding judicial precedents. The appellant had already reversed proportionate credit before the issuance of the show-cause notice, which, according to the appellant, fulfilled the requirements of Rule 6(3A). The appellant cited multiple decisions in support of their argument. In the final decision, the Tribunal found that the appellant had complied with the provisions of Rule 6(3A) by reversing proportionate CENVAT credit before the issuance of the show-cause notice. The Tribunal relied on a Division Bench decision and various judicial precedents to support its conclusion that the demand raised by the Revenue was not legal and proper. Additionally, the Tribunal noted that the demand was hit by limitation and that the impugned order was unsustainable both on merit and limitation grounds. Consequently, the Tribunal set aside the impugned order, allowing the appeal of the appellant.
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