2020 (3) TMI 81 - HC - Central Excise

CENVAT credit - inputs used in the provision of exempted goods as well as traded goods - non-maintenance of separate account as required under Rule 6(2) of the CCR - option available under Rule 6(3) of the CCR not followed - HELD THAT - The issue decided in the case of COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-II VERSUS MAIZE PRODUCTS 2008 (8) TMI 365 - HIGH COURT OF GUJARAT AT AHMEDABAD where it was held that In the facts and circumstances of the case, it is apparent that the entire controversy has been decided by the Tribunal by merely remitting the matter back to the Adjudicating Authority to re-determine the credit in accordance with law. If any reversal has been made by the respondent-assessee, the same is subject to verification and adjustment if ultimately any further amount is found reversible. Appeal dismissed.

Summary

Issues:
- Interpretation of Section 35G of the Central Excise Act, 1944
- Application of Rule 6(2) and Rule 6(3) of the Cenvat Credit Rules, 2002
- Reversal of credit for inputs used in the provision of exempted goods
- Compliance with maintaining separate accounts for dutiable and exempted products

Interpretation of Section 35G:
The Tax Appeal under Section 35G of the Central Excise Act, 1944 was filed by the Revenue against an order passed by the Customs, Excise & Service Tax Appellate Tribunal. The main issue raised in the appeal was whether the subsequent reversal of credit, attributable to inputs used in the provision of exempted goods, along with interest, is sufficient to discharge the demand of amount in cases where the assessee fails to maintain separate accounts as required under Rule 6(2) of the CCR or has not followed any of the options available under Rule 6(3) of the CCR.

Application of Cenvat Credit Rules:
The Court referred to a previous decision involving the same assessee where it was observed that under Rule 6(2) of the Cenvat Credit Rules, a manufacturer is obligated to maintain separate accounts for inputs used in dutiable and exempted products. However, if separate accounts are not maintained, the manufacturer must follow conditions specified in Rule 6(3). The Court highlighted that the manufacturer is required to pay the amount mentioned in the conditions by debiting the cenvat credit or through other means. The Tribunal also cited this previous decision while dismissing the Revenue's appeal in the present case.

Reversal of Credit and Compliance:
Given the precedent set by the previous decision and the Tribunal's reliance on it, the Court concluded that the proposed question raised by the Revenue is no longer a new issue. Consequently, the appeal was deemed to have failed and was dismissed. This judgment underscores the importance of complying with the Cenvat Credit Rules regarding maintaining separate accounts for dutiable and exempted products and the implications of not doing so.

This detailed analysis of the judgment provides insights into the interpretation of relevant legal provisions, the application of rules governing credit reversal, and the significance of compliance with accounting requirements in excise matters.