2019 (2) TMI 402 - AT - Central Excise

CENVAT Credit - Clearance of manufactured products to various organisations of Government of India - benefit of N/N. 10/1997-CE and N/N. 64/1995-CE availed - no separate records maintained for inputs and input services utilized for manufacturing exempted goods - Held that - For the clearances made to the defence related establishments, respondent is discharging the applicable Central Excise Duty. It is also noticed that the demand is for the period 2004-05 to 2007-08. It remains also undisputed that the respondent had paid off the CENVAT credit with interest, attributable proportionately to the inputs and input services utilized for manufacturing of the exempted goods. Rule 6 (3) (ii) very clearly indicates that a manufacturer needs to reverse only the CENVAT credit attributable to the inputs and input services used in or in relation to the goods which are manufactured and cleared claiming exemption - In the case in hand, there is no dispute, that respondent had reversed the CENVAT credit on the inputs and input services attributable to the exempted goods cleared by them (recorded in impugned order). Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of Rule 6 (3) of CENVAT Credit Rules, 2004 regarding maintenance of separate records for dutiable and exempted goods.
2. Applicability of retrospective amendment to Rule 6 (3) regarding the reversal of CENVAT credit.
3. Compliance with the provisions of Rule 6 (3) for payment of an amount equivalent to CENVAT credit attributable to inputs and input services used in manufacturing exempted goods.

Analysis:

Issue 1: Interpretation of Rule 6 (3) of CENVAT Credit Rules, 2004
The case involved a dispute where the respondent, a manufacturer of excisable goods, cleared products to government organizations under exemption notifications without maintaining separate accounts for inputs and input services used for manufacturing exempted goods. The revenue authorities demanded payment equivalent to a percentage of the value of exempted goods, citing non-compliance with Rule 6 (2) mandating separate records. The adjudicating authority accepted the respondent's contention that they had reversed the attributable CENVAT credit, leading to the dropping of the demand. The appellate tribunal noted that the demand was for excisable goods and the respondent had paid the CENVAT credit with interest for the exempted goods, thus complying with Rule 6 (3).

Issue 2: Applicability of Retrospective Amendment to Rule 6 (3)
The respondent argued that a retrospective amendment allowed manufacturers to reverse CENVAT credit before 01.04.2008 by producing a Chartered Accountant's Certificate and paying the amount within six months of enactment. The tribunal acknowledged the retrospective amendment to Rule 6 (3) and clarified that the respondent, by paying the proportionate credit before the amendment, correctly followed the legislation effective from 10.09.2004, as per a department circular.

Issue 3: Compliance with Rule 6 (3) for Payment of CENVAT Credit
The tribunal highlighted that Rule 6 (3) (ii) required manufacturers to reverse only the CENVAT credit attributable to inputs and input services used in manufacturing exempted goods. As the respondent had reversed the credit on inputs and input services for exempted goods, as evidenced in the records, the tribunal upheld the impugned order, stating it correctly applied the retrospective amendment to Rule 6 (3). Consequently, the appeal by the revenue was rejected.

In conclusion, the appellate tribunal found that the impugned order was legally sound, as the respondent had complied with the provisions of Rule 6 (3) by reversing the CENVAT credit attributable to inputs and input services used in manufacturing exempted goods, leading to the rejection of the appeal.