2021 (11) TMI 14 - AT - Central Excise

Reversal of CENVAT Credit - common input/input services used for taxable as well as exempt goods - manufacture of dutiable Spray Nozzles and trading of goods such as pipes and compressors - non-maintenance of separate records - Rule 6(3A) of the CCR 2004 - period of July 2010 to March 2015 - HELD THAT - In one of the recent orders, learned Ahmedabad Bench of CESTAT in the case of COMMISSIONER OF CENTRAL EXCISE ST, RAJKOT VERSUS M/S. RELIANCE INDUSTRIES LIMITED 2019 (3) TMI 784 - CESTAT AHMEDABAD has held that As per clause (b)(ii) (iv), it is clearly provided that entire credit in respect of receipt and use of inputs/input service is allowed when such input and input service is used in dutiable final products and taxable service. However, nowhere in Rule 6 it is provided that the input or input service used in dutiable goods shall not be allowed. Further it is observed that the adjudicating authority has raised the demand of ₹ 5,94,034/- inter alia alleging that there was a delay in exercising option, which is only as per the directions of this Bench in the first round, which should have been given by the adjudicating authority himself. Moreover, the demand raised for a mere delay in exercising the option is highly disproportionate since the delay, if at all, is a mere irregularity considering the facts of this case and the same may, at the most, attract some interest which perhaps has even been paid by the appellant while reversing the amount. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availing CENVAT credit on common input services without separate accounts.
2. Demand raised under Rule 6(3) based on audit note.
3. Appropriation of reversed credit against the demand.
4. Confirmation of demand by adjudicating authority.
5. Exercise of option under Rule 6(3A) for proportionate reversal.
6. De novo adjudication confirming demand for disputed period.
7. Analysis of recent order by Ahmedabad Bench of CESTAT.
8. Disallowance of CENVAT credit on input services used in dutiable goods.
9. Delay in exercising option and proportionality of demand.
10. Setting aside of impugned order and allowing the appeal.

Analysis:
1. The appellant availed CENVAT credit on common input services used for both manufacturing dutiable goods and trading activities without maintaining separate accounts, leading to a demand based on Rule 6(3) for the difference value of sales.
2. The demand was proposed under Rule 6(3) without further investigation, and the adjudicating authority confirmed a significant amount payable under Rule 6(3)(i) for the period in question, appropriating the reversed credit against the demand.
3. The appellant contended that they had already reversed the CENVAT credit and exercised the option under Rule 6(3A) for proportionate reversal, which was considered during de novo adjudication.
4. The de novo Order-in-Appeal confirmed a demand for the disputed period, citing the appellant's previous reversal of the demanded amount and the timing of payment after exercising the option under Rule 6(3A).
5. The appellate tribunal analyzed a recent order by the Ahmedabad Bench of CESTAT, emphasizing that CENVAT credit on input services used in dutiable goods should not be disallowed, contrary to the Revenue's interpretation.
6. The tribunal found the issue in the present case aligned with the above ruling, emphasizing that the demand for delay in exercising the option was disproportionate and set aside the impugned order, allowing the appeal with consequential benefits as per law.