2019 (1) TMI 44 - AT - Central Excise

Imposition of penalty - reversal of credit on inputs used exclusively for exempted goods on being pointed out - non-maintenance of separate records - Rule 6(3) of CCR - Held that - The appellants have opted to pay 6% of the value of the exempted goods as per the option given under Rule 6(3)(i) because they are unable to maintain separate accounts relating to inputs used in the exempted goods - the appellants have taken total credit of ₹ 56,79,065 and in order to buy peace, he has further reversed ₹ 10,34,237 along with interest; though, he was not required to pay the same. Once the appellant has paid the amount as per Rule 6(3) of CCR, the Revenue cannot insist that the appellants should reverse the entire credit - the appellants in order to buy peace reverse the entire credit and also paid the interest on the remaining amount - thus, it was not justified to impose penalty - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to reverse credit availed on inputs used exclusively for exempted goods.
2. Liability to pay interest and equivalent penalty.
3. Challenge against the imposition of penalty.

Analysis:
1. The appeal was against the order directing the appellant to reverse the amount of ?10,34,237/- for credit availed on inputs used exclusively for exempted goods. The appellant was a manufacturer of certain goods exempted from duty and had availed credit on inputs used in their manufacture. However, they were found to have used some inputs exclusively for exempted goods, leading to a demand for repayment of CENVAT credit. The Commissioner (A) partially upheld the demand, leading to the appeal.

2. The appellant argued that they had opted to pay 6% of the value of exempted goods under Rule 6(3)(i) due to difficulties in maintaining separate accounts for inputs. They contended that once this payment was made, insisting on separate accounts was contrary to the rule's objective. The appellant had availed total credit of ?56,79,065/- and reversed ?10,34,237/- to offset the credit availed on inputs for exempted goods. They cited precedents to support their position.

3. The Revenue argued that the appellant wrongly availed CENVAT credit on inputs exclusively used for exempted goods, justifying the penalty. However, the Tribunal found that the appellant had followed the prescribed rule by paying 6% of the exempted goods' value and had reversed the credit voluntarily. Citing previous decisions, the Tribunal held that once the appellant had complied with Rule 6(3), the Revenue could not insist on reversing the entire credit. Consequently, the penalty was set aside, allowing the appeal of the appellant.