2019 (12) TMI 606 - AT - Central Excise

CENVAT Credit - common input services used for manufacture of dutiable and exempted products - non-maintenance of separate records - case of the department is that since the common input service on which credit was availed was used in respect of trading turn over, appellant is required to pay 6% in terms of Rule 6(3) - HELD THAT - Though the appellant had availed Cenvat Credit on common input service which is attributed to both dutiable manufacturing goods as well as the trading activity, but, after the adjudication of the Show Cause Notice the appellant have reversed Cenvat Credit along with the interest attributed to trading activity. With this fact the situation became as if no Cenvat Credit was taken right from the date of taking credit by the appellant. It is observed that though it is the appellants claim that the Cenvat Credit attributed to the trading activity along with interest has been paid and the copy of Cenvat account for the credit reversal as well as challan for the payment of interest has been enclosed. Considering this, the demand of 6% is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availing Cenvat credit for common input service used in trading activity
- Demand of 6% under Rule 6(3) for trading turnover

Analysis:

1. The appellant engaged in manufacturing dutiable and exempted products availed Cenvat credit for input and input service, including common input service used in trading activity. The department demanded 6% of the trading turnover under Rule 6(3), which was confirmed by the Commissioner (Appeal), leading to the current appeal.

2. The appellant, through their counsel, argued that they reversed the Cenvat Credit for the trading activity along with interest after the Show Cause Notice adjudication, complying with Rule 6(3A) of Cenvat Credit Rules, 2004. They cited various judgments to support their position, emphasizing that once the credit along with interest is paid, no 6% demand can be made.

3. The revenue representative reiterated the impugned order's findings and referred to a judgment where the appellant's Civil Appeal was dismissed by the Supreme Court.

4. Upon review, the tribunal found that the appellant had reversed the Cenvat Credit and interest for the trading activity post the Show Cause Notice adjudication. Citing a Supreme Court judgment, it was established that such reversal equated to no credit being availed, leading to the inadmissibility of the 6% demand.

5. The tribunal highlighted previous cases where it was held that once Cenvat Credit and interest are paid, no 6% demand can be imposed. It referenced specific judgments and legal interpretations supporting the appellant's position based on the timing of credit reversal.

6. Considering the appellant's claim of reversing the Cenvat Credit and interest for the trading activity, the tribunal deemed the 6% demand unsustainable, setting aside the impugned order and allowing the appeal with consequential relief.

7. The tribunal granted the revenue the option to verify the credit reversal and interest payment, with the provision to file an application for restoration of the appeal if any discrepancies were found. The judgment concluded with the decision pronounced in the open court.