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2022 (9) TMI 1282 - AT - Central ExciseCENVAT Credit - input services have been used in or in relation to the manufacture of the said dutiable final products as well as exempted goods - non-maintenance of separate records - period from July, 2010 to March, 2014 - requirement to pay an amount equal to 5% (effective up to 16.03.2012) and 6% (w.e.f.17.03.2012) of the value of exempted goods or not - HELD THAT - This Tribunal in the case of M/S PHILIPS CARBON BLACK LTD., M/S PROMODE KUMBHAKAR VERSUS CCEX SERVICE TAX, DURGAPUR AND CGST EXCISE, BOLPUR VERSUS M/S PHILIPS CARBON BLACK LTD. 2020 (1) TMI 530 - CESTAT KOLKATA had held that non-compliance of the procedure prescribed under Rule 6(3A) of the Cenvat Credit Rules, 2004 does not result in loss of substantive right of the assessee to avail the option of reversing proportional credit and such non-compliance is at best a procedural lapse, which can be condoned. Further, Hon ble Supreme Court in the case of CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR 1995 (12) TMI 72 - SUPREME COURT has held that reversal of credit along with interest amounts to a situation, which is akin to as if the assessee had never availed such credit at the first place. Also, Hon ble Calcutta High Court in the case of COMMISSIONER OF SERVICE TAX-1, KOLKATA VERSUS M/S. SURYA VISTACOM PRIVATE LIMITED 2022 (7) TMI 719 - CALCUTTA HIGH COURT has held that if according to the adjudicating authority, the assesse did not abide by the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004, it was open to such adjudicating authority to reject the assessee s claim as regards the disputed Cenvat Credit and it could not mechanically invoke the 6% Rule on the assesse. The demand cannot sustain and is accordingly set aside - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the Appellant is required to pay an amount equal to 5% or 6% of the value of exempted goods for not maintaining separate accounts for common input services. 2. Whether the reversal of credit attributable to common input services used for exempted goods is sufficient compliance. 3. Whether the extended period of limitation can be invoked in the present case. Issue-Wise Detailed Analysis: 1. Requirement to Pay 5% or 6% of the Value of Exempted Goods: The primary issue addressed is whether the Appellant, who did not maintain separate accounts for common input services used in the manufacture of both dutiable final products and exempted goods, is mandatorily required to pay an amount equal to 5% (up to 16.03.2012) and 6% (from 17.03.2012) of the value of exempted goods. The Tribunal cited previous judgments, including the case of *Philips Carbon Black Limited*, which held that non-compliance with the procedure under Rule 6(3A) of the Cenvat Credit Rules, 2004, is a procedural lapse and does not result in the loss of the substantive right to avail the option of reversing proportional credit. The Tribunal found that the Appellant's reversal of credit attributable to common input services used for exempted goods was sufficient compliance. 2. Reversal of Credit Attributable to Common Input Services: The Tribunal referenced the Supreme Court's decision in *Chandrapur Magnet Wires*, which held that the reversal of credit along with interest is akin to the situation where the assessee had never availed such credit in the first place. The Appellant had reversed the credit attributable to the common input services used in the manufacture of exempted goods, which the Tribunal found to be in compliance with the law. The Tribunal reiterated that procedural non-compliance should not result in the mechanical application of the 5% or 6% rule by the Department. 3. Invocation of Extended Period of Limitation: The Tribunal examined whether the extended period of limitation under Section 11A (4) of the Central Excise Act, 1944, could be invoked. The Appellant argued that there was no deliberate suppression or misstatement with the intent to evade taxes, and the entire case was based on information available in statutory books of accounts. The Tribunal found no specific allegation or prima facie finding of any willful misstatement or suppression by the Appellant. The Tribunal cited the decision in *Commissioner of Service Tax I, Kolkata Vs. M/s Surya Vistacom Private Limited*, which emphasized that the extended period of limitation requires evidence of deliberate default. The Tribunal concluded that the extended period of limitation could not be invoked in the present case. Conclusion: The Tribunal allowed the appeal, setting aside the demand and penalty imposed by the Department. It held that the Appellant's reversal of credit attributable to common input services used in the manufacture of exempted goods was sufficient compliance, and procedural non-compliance did not justify the mechanical application of the 5% or 6% rule. Additionally, the Tribunal found that the extended period of limitation could not be invoked due to the lack of evidence of deliberate suppression or misstatement by the Appellant. The appeal was allowed with consequential relief.
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