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2023 (8) TMI 1135 - AT - Central ExciseReversal of CENVAT credit - Liability to pay 10%/5% of the value of the exempted goods - common input/ input services used for dutiable as well as exempted goods - assessee has reversed the proportionate Cenvat credit on the input/ input service attributed to the exempted goods - demand dropped for extended period of limitation. HELD THAT - It is settled that once the assessee reverse the propionate credit along with interest, if there is any delay in reversal, the demand of 10% /6%/5% of the value of exempted goods shall not be sustainable. Reliance placed in the case of COMMISSIONER OF SERVICE TAX-1, KOLKATA VERSUS M/S. SURYA VISTACOM PRIVATE LIMITED 2022 (7) TMI 719 - CALCUTTA HIGH COURT , M/S WELSPUN CORP LTD VERSUS C.C.E., - KUTCH (GANDHIDHAM) 2018 (12) TMI 165 - CESTAT AHMEDABAD , COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD-II VERSUS MAIZE PRODUCTS 2008 (8) TMI 365 - HIGH COURT OF GUJARAT AT AHMEDABAD and COMMISSIONER OF C. EX. VERSUS MAAN PHARMACEUTICALS LTD. 2010 (12) TMI 399 - GUJARAT HIGH COURT . In the case of M/S. SURYA VISTACOM PRIVATE LIMITED it was held that if according to the adjudicating authority, the assessee did not abide by the provisions of Rule 6(3) of the Rules, it was open to the adjudicating authority to reject the assessee s claim as regards the disputed Cenvat credit and it could not mechanically invoke 6% Rule on the assessee. The adjudicating authority has not verified the correctness of reversal during the normal period of limitation. Therefore only for the limited purpose of verification of the amount of reversal, during the normal period, assessee s appeal needs to be remitted back to the Adjudicating authority. Assessee s appeal is remanded to the adjudicating authority, for passing a de-novo order.
Issues Involved:
1. Liability of Assessee to Pay 10%/5% of the Value of Exempted Goods 2. Dropping of Demand for the Extended Period by the Commissioner Summary: 1. Liability of Assessee to Pay 10%/5% of the Value of Exempted Goods: The primary issue was whether the assessee is required to pay 10%/5% of the value of exempted goods when common inputs/input services are used for both dutiable and exempted goods, especially when the assessee has reversed the proportionate Cenvat credit on the inputs/input services attributed to the exempted goods. The Learned Commissioner confirmed the demand based on the absence of a statutory provision for such reversal in the Cenvat Credit Rules, 2004, asserting that the only option was to pay the specified percentage of the value of exempted goods. The assessee's counsel argued that this position disregards settled legal precedents, citing multiple judgments where proportionate reversal of credit was accepted as sufficient compliance, negating the need to pay 10%/5% of the value of exempted goods. 2. Dropping of Demand for the Extended Period by the Commissioner: The second issue was whether the Commissioner was correct in dropping the demand for the extended period. The Commissioner had dropped the demand on grounds of time bar, noting that the department had knowledge of the assessee's practices from audits conducted as early as 2004, and that the assessee had not suppressed any facts. The Commissioner concluded that the extended period could not be invoked, and the demand should be confined to the normal period of one year. This decision was upheld by the Tribunal, which found no suppression of facts by the assessee, making the extended period demand unsustainable. Tribunal's Findings: 1. Revenue's Appeal: - The Tribunal found that the department was aware of the assessee's practices from various audits and communications. Hence, there was no suppression of facts, and the extended period demand was rightly set aside by the Adjudicating Authority. 2. Assessee's Appeal: - The Tribunal held that the demand of Rs. 4,05,120/- confirmed by the Commissioner was incorrect. The Tribunal noted that while there is no explicit statutory provision for proportionate reversal, numerous judicial precedents have established that such reversal along with interest is sufficient compliance. Consequently, the demand for 10%/5% of the value of exempted goods was not sustainable. - The Tribunal remanded the matter back to the Adjudicating Authority for verification of the correctness of the reversal during the normal period of limitation. Conclusion: The Tribunal dismissed the Revenue's appeal and remanded the assessee's appeal to the Adjudicating Authority for a de-novo order, emphasizing that proportionate reversal of credit with interest satisfies compliance requirements under Rule 6(3) of the Cenvat Credit Rules, 2004.
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