2019 (2) TMI 341 - AT - Central Excise

CENVAT Credit - inputs used in manufacturing both dutiable and as also exempted final product - non-maintenance of separate records or not - case of appellant is that two separate records were being maintained by them in terms of Rule 6 of Cenvat Credit Rules - Rule 6 of Cenvat credit Rules - Held that - If an assessee is availing the credit only in respect of the raw materials used for manufacture of dutiable products and no credit is being taken on the inputs used for exempted final product, such legislative intent gets satisfied and the provisions of Rule 6 which disallow taking of such credit gets fully complied with - As such, simple non-maintenance of accounts in respect of both the types of final products and the use of the raw materials in the manufacture of the same, cannot be adopted as a ground or a reason for denial of the benefit which is otherwise available and which an assessee has satisfied. However, the fact is that the inputs were common for both the types of products and the appellant was adjusting the credit on fortnight basis depending upon percentage of the production of dutiable as well as exempted products - Admittedly, the adjudicating authority has not verified such maintaining of records, inasmuch as, he has denied the benefit in principle itself. As such, the matter needs to go back for verification of the appellants claim of availment of credit only in respect of inputs used for manufacture of dutiable products - matter on remand. CENVAT Credit - invoices issued by M/s Parle Biscuits Ltd. as ISD - Held that - By merely doing the job work for M/s Parle, the appellant has not become a unit of M/s Parle Biscuits Ltd. In terms of Rule 7, an ISD is authorized to distribute the Cenvat credit of service tax only to its own unit and not to the job worker - a job worker is not entitled to avail the credit on the basis of input invoices issued by the principal manufacturer as ISD - the entire demand is within limitation and the same is upheld. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Maintenance of separate accounts under Rule 6 of Cenvat Credit Rules.
2. Demand of duty and penalty for not maintaining separate accounts.
3. Availment of Cenvat credit based on invoices from another entity.
4. Applicability of ISD provisions to job workers.

Analysis:

Issue 1: Maintenance of separate accounts under Rule 6 of Cenvat Credit Rules
The appellants were manufacturing biscuits under different MRPs, some attracting lower than ?100 per Kg and exempted from duty. The Cenvat credit Rules require maintaining separate accounts for inputs used in dutiable and exempted products. The appellants claimed to reconcile credits fortnightly based on dutiable and exempted product ratios.

Issue 2: Demand of duty and penalty for not maintaining separate accounts
The Revenue alleged non-compliance with Rule 6, issuing a show cause notice for duty demand and penalties. The Commissioner confirmed the demand and penalties, emphasizing the strict obligation to maintain separate accounts as per Rule 6.

Issue 3: Availment of Cenvat credit based on invoices from another entity
The appellants availed credit based on invoices from another entity, which the Commissioner found in violation of Rule 7. The Tribunal noted previous decisions disallowing job workers to avail credit based on ISD invoices, upholding the demand but setting aside the penalty.

Issue 4: Applicability of ISD provisions to job workers
The Tribunal clarified that job workers cannot avail credit based on ISD invoices, aligning with previous decisions. The demand was upheld within the limitation period, with the penalty set aside based on legal precedents.

In conclusion, the Tribunal set aside the order regarding separate accounts maintenance, remanding for verification. The demand related to ISD invoices was confirmed but penalty was annulled. The appeal was disposed of accordingly.