2018 (12) TMI 497 - AT - Central Excise

CENVAT Credit - input/input services used in dutiable and exempted excisable goods - non-maintenance of separate records - Rule 6 (3A) of CCR, 2004 - Held that - The appellants have exercised the option of applicability of Rule 6 (3A) of CCR, 2004 and due intimation of the same was given to the Department vide a letter dated 01.04.2014. This option was exercised because the appellant admittedly was not maintaining a separate accounts for the receipt, consumption and inventory of inputs used - it is apparent that sub-clause (a) of sub-rule (3A) has been complied with by the appellant and that the appellant had been making the payment in accordance of sub-rule 3A (b) (iii). CENVAT Credit - sale of electricity generated by the appellant to the other customers against monetary consideration - demand of reversal of credit on the ground that electricity is an exempted commodity - Held that - That is the electricity is held to be an excisable goods. Once it is held as excisable, denial of cenvat credit there upon is contradictory to the legislative intent. The findings are therefore, liable to be set aside - credit allowed. CENVAT Credit - quantity of input as is used in or in relation to the manufacture of exempted goods - waste/by-product - Held that - Iron fills as are emerging as a by-product but an inevitable waste due to being segregated during the manufacture of the final product, the appellant is not liable to be vested with any liability on account of Rules 6 (3) (b) of CCR, 2004 - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availing Cenvat credit on inputs and input services for both dutiable and exempted excisable goods without maintaining separate accounts
- Allegation of not paying an amount equal to 6% of value of exempted goods cleared/sold as per Rule 6(3)(i) of Cenvat Credit Rules, 2004
- Show cause notice for recovery of amount along with interest and penalty
- Appeal before Commissioner (Appeals) challenging the order
- Exercise of option under Rule 6(3A) of CCR, 2004
- Department's contention on non-maintenance of separate accounts
- Denial of Cenvat credit on sale of electricity as an exempted commodity
- Applicability of Rule 6(3)(b) of CCR, 2004 on by-products or waste
- Interpretation of electricity as excisable goods
- Compliance with Rule 6(3A) and payment procedure

Analysis:

The case involves the appellant availing Cenvat credit on inputs and input services for both dutiable and exempted excisable goods without maintaining separate accounts as required by Rule 6(2) of the Cenvat Credit Rules, 2004. The Department alleged non-payment of 6% of the value of exempted goods cleared/sold, leading to a show cause notice for recovery of the amount along with interest and penalty. The Commissioner (Appeals) upheld the decision, prompting the appeal before the Tribunal.

The appellant argued that they exercised the option under Rule 6(3A) of CCR, 2004 and had intimated the Department accordingly. They contended that they were entitled to exercise this option due to not maintaining separate accounts for inputs used in relation to both dutiable and exempted goods. The appellant relied on legal precedents to support their position and claimed that the show cause notice was time-barred.

The Department, however, emphasized the appellant's failure to maintain separate accounts for Cenvat credit related to dutiable and exempted goods. They argued that despite the appellant's submission of the option under Rule 6(3A), monthly provisional payments were still required. The Department supported the decision under challenge and urged dismissal of the appeal.

The Tribunal noted that the appellant had complied with the requirements of Rule 6(3A) by intimating the Department and making payments as per the provisions. Regarding the sale of electricity, the Tribunal interpreted electricity as excisable goods, contradicting the Department's denial of Cenvat credit. Additionally, the Tribunal held that by-products or waste like iron fills were not subject to liability under Rule 6(3)(b) of CCR, 2004, citing legal precedents to support this position.

In conclusion, the Tribunal found the order under challenge unsustainable and set it aside, allowing the appeal. The judgment emphasized compliance with Rule 6(3A) and the interpretation of electricity as excisable goods, ultimately ruling in favor of the appellant.

End of Analysis