2024 (1) TMI 446 - AT - Central Excise

Reversal of proportionate CENVAT Credit - electricity so generated in the power plant is partly used by the appellant within the factory and the excess portion is wheeled out to various other entities - case of Revenue is that the reversals done by the appellant was not in accordance with law and the amount reversed was much less than what had to be reversed as per Rule 6(3A) of CCR, 2004 - period 2014-2015 and 2015-2016 - HELD THAT - As seen from Rule 6(1), its clear that cenvat credit cannot be allowed on inputs and input services that are exclusively used for exempted goods or services. Therefore, Rule (3A) needs to be enforced in order to determine the extent of cenvat credit reversal when common inputs or services are used in both dutiable and exempted goods/services. The fact that the reversal was done as per the above Rule and promptly intimated the department is not in dispute; the only dispute with regard to above Clause (c)(iii) of Rule 6(3A) where the credit attributable to the exempted goods needs to be calculated as per the formula M/N P where P denotes the total credit taken on input services during the financial year. The Commissioner in the impugned order rejects the appellant s contention that the total credit here refers to only the common services which are attributable to dutiable and exempted goods. This issue now stands settled in view of the amendments made to the CCR 2004 vide Notification No. 13/2016-C.E. (NT) dated 01.03.2016 wherein it has been clarified that the formula refers to the common inputs/input services for ascertaining the credit to be reversed on exempted products. The Tribunal in the case of M/S E-CONNECT SOLUTIONS (P) LTD. VERSUS CENTRAL EXCISE AND CENTRAL GOODS SERVICE TAX, UDAIPUR 2020 (11) TMI 282 - CESTAT NEW DELHI observed that It would be clear from a conjoint reading of sub-rules 6(1), (2) and (3) of Rule 6 that the total Cenvat credit for the purpose of formula under Rule 6(3A) is only total Cenvat credit of common input service and cannot include Cenvat credit on input service exclusively used for the manufacture of dutiable goods. The impugned order is set aside - the appeal is allowed.

Summary

Issues Involved:
1. Whether the cenvat credit amount reversed by the appellant is in accordance with Rule 6(3A) of the Cenvat Credit Rules 2004 for the period 2014-2015 and 2015-2016.
2. Interpretation of the term "total Cenvat credit" in the formula under Rule 6(3A).
3. Applicability of the amendment to Rule 6(3A) made by Notification No. 13/2016-C.E. (NT) dated 01.03.2016.
4. Whether the demand is barred by limitation.

Summary:

Issue 1: Compliance with Rule 6(3A) of CCR 2004
The appellant, M/s. JSW Steel Ltd, reversed cenvat credit on inputs and input services used in the generation of electricity, which was partly used within the factory and partly wheeled out. The department issued a show-cause notice alleging that the reversals were not in accordance with Rule 6(3A) of CCR 2004, confirming a demand of Rs. 24,68,32,910/- along with interest and penalty.

Issue 2: Interpretation of "Total Cenvat Credit"
The appellant argued that Rule 6(3A) applies only to inputs and input services used in the manufacture of dutiable and exempted goods, not the entire input service credit availed. The Tribunal referred to previous case laws, including *Commissioner of Central Excise vs. Reliance Industries Ltd.* and *E-Connect Solutions (P) Ltd. vs. Commissioner of C. Ex & CGST*, which clarified that "total Cenvat credit" for the formula in Rule 6(3A) should include only common input services and not those used exclusively for taxable services.

Issue 3: Applicability of Amendment
The Tribunal acknowledged the amendment to Rule 6(3A) by Notification No. 13/2016-C.E. (NT) dated 01.03.2016, which clarified that the formula refers to common inputs/input services for ascertaining the credit to be reversed on exempted products. This amendment was considered clarificatory and thus applicable retrospectively.

Issue 4: Limitation
The appellant contended that the demand was barred by limitation as all required details were provided in the ER-1 returns, and there was no suppression or intention to evade duty. The Tribunal did not specifically address this issue in the final ruling.

Conclusion:
The Tribunal set aside the impugned order, agreeing with the appellant's interpretation and application of Rule 6(3A) and the retrospective applicability of the 2016 amendment. The appeal was allowed in favor of the appellant.

Order Pronounced:
The order was pronounced in open court on 04.01.2024.