2023 (9) TMI 12 - AT - Central Excise

CENVAT Credit - common inputs used in the manufacture of both dutiable and exempted goods - maintenance of separate accounts - reversal of proportionate cenvat credit of the inputs used for exempted goods - Chartered Accountant s Certificate submitted by the respondents was not supported by any documentary evidences and no verification of correctness of the facts in the Chartered Accountant s Certificate was done by the adjudicating authority - unjust enrichment. HELD THAT - In terms of the amendment brought in Sections 68 to 72 of the Finance Act, 2010, wherein it is clear that if the proportionate cenvat credit of inputs or input services attributable to exempted final product is reversed along with the payment of interest within a period of six months from the assent of the Hon ble President to the Finance Bill, 2010 and the Certificate to that effect is produced by the respondents, it is established that no proceedings will be sustainable against the respondents and the adjudicating authority in his order has examined the issue and after examining the issue, which was supported by the Certificate issued by the Chartered Accountant certifying that the respondents have reversed the proportionate cenvat credit attributable of input or input services to the final products and the interest due has been paid. There are no infirmity with the impugned order and accordingly, the same is upheld - the appeals filed by the Revenue are dismissed.

Summary

Issues:
The case involves the issue of availing cenvat credit on inputs and input services in the manufacture of both dutiable and exempted goods, the maintenance of separate accounts for dutiable and exempted goods, the validity of the Chartered Accountant's Certificate submitted by the respondents, and the applicability of the amendments brought in by the Finance Act, 2010.

Availing Cenvat Credit on Inputs:
The respondents, engaged in the manufacture of paper and paper board and pulp, availed cenvat credit on inputs and input services for paying duty on their final products. It was discovered during investigation that common inputs were used in the manufacture of both dutiable and exempted goods. The respondents maintained separate accounts and reversed the proportionate cenvat credit of inputs used for exempted goods. However, it was alleged that the separate accounts were maintained in a hypothetical manner through a back calculation method, which did not reflect the actual use of inputs separately. The respondents also availed cenvat credit on fuels in the manufacture of both dutiable and exempted goods.

Show-Cause Notices and Proceedings:
Show-cause notices were issued to the respondents for recovery of amounts under Central Excise Rules and Cenvat Credit Rules, along with interest and penalties. The respondents contested the matters by referring to a previous decision and developments through the Finance Bill, 2010, which proposed changes to regularize the common inputs used in dutiable and exempted final products by paying equivalent cenvat credit attributable to inputs used in exempted goods along with interest.

Validity of Chartered Accountant's Certificate:
The respondents submitted a Certificate from a Chartered Accountant certifying the reversal of cenvat credit attributable to inputs used in exempted goods, along with payment of due interest. The Adjudicating Authority dropped the proceedings against the respondent based on this submission. The Revenue appealed, arguing that the Certificate was not supported by documentary evidence and no verification was done by the authority.

Applicability of Finance Act, 2010 Amendments:
The amendments brought in by the Finance Act, 2010, stated that if the proportionate cenvat credit of inputs attributable to exempted final products is reversed along with interest within a specified period, and a Certificate to that effect is produced, no proceedings will be sustainable against the respondents. The Adjudicating Authority found that the respondents had complied with these requirements, as supported by the Chartered Accountant's Certificate. The appeals filed by the Revenue did not dispute the reversal of credit. Consequently, the impugned order was upheld, and the appeals filed by the Revenue were dismissed, along with the disposal of Cross Objections filed by the respondents.