2024 (3) TMI 1170 - AT - Central Excise

CENVAT Credit - purchase and sale of goods i.e. trading of goods - availing common input services without maintaining separate inventory for the taxable and exempted services in terms of rule 6(2) of the Cenvat Credit Rules (CCR) 2004 - separate accounts are not being maintained for dutiable and exempted services - whether proportionate reversal of credit is sufficient to comply with the relevant CCR 2004? - period of dispute is July 2014 to June 2017 - HELD THAT - Rules 6 very clearly establish that the taxpayer has been given an option to reverse the credit along with the interest when common credit is availed on inputs and input services on both dutiable and exempted goods/services. In the case of M/S. SIFY TECHNOLOGIES LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI 2023 (3) TMI 12 - CESTAT CHENNAI relied upon by the Revenue the facts are entirely different and the question there was one who manufactures and clears simultaneously dutiable and exempted goods various alternatives were provided to the taxpayer and having chosen a particular option they cannot avail any other option simultaneously and the amended provisions are also not being considered - In the present case the appellant does not manufacture consciously dutiable and exempted products but at times trades in goods that were found to be excess and therefore he was liable to reverse the CENVAT credit availed on the traded goods which are nothing but exempted products. Since the audit officers have noticed this irregularity the appellant having accepted it they have reversed the proportionate credit as laid down by Rule 6(3A) of the CCR 2004 which is one of the options provided to the tax payer. Therefore the question of denying this option to the appellant is not acceptable. The Hon ble High Court of Telangana Hyderabad in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT had observed We may also note that in the event the petitioner was found to have availed Cenvat Credit wrongly Rule 14 of the Cenvat Credit Rules 2004 empowered the authorities to recover such credit which had been taken or utilised wrongly along with interest. However the second respondent did not choose to exercise power under this Rule but relied upon Rule 6(3)(i) and made the choice of the option thereunder for the petitioner viz. to pay 5%/6% of the value of the exempted services. The statutory scheme did not vest the second respondent with the power of making such a choice on behalf of the petitioner. In the case of COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX VERSUS M/S RAJASTHAN PRIME STEEL PROCESSING CENTER PVT LTD. SHRI SACHIN GUPTA SENIOR EXECUTIVE (ACCOUNTS AND EXCISE) SHRI RAJPAL SINGH SENIOR MANAGER (FINANCE AND ADMINISTRATION) AND AUTHORISED SIGNATORY 2019 (8) TMI 1175 - RAJASTHAN HIGH COURT in a similar set of facts the Hon ble High Court observed that in short the Revenue argument is that Rule 6(3A) is not nearly procedural but was binding upon the assessee who could not have claimed the benefit of even proportionate credit or it would have otherwise been entitled to input service for which CENVAT Credit was admissible without following the procedure the Show-cause notice in this case covers two different periods(2011-16) substantial part of that period was when Rule 6(3A) did not exist - In the present case the period of dispute is after the introduction of Rule 3(A) in the CENVAT Credit Rule 2004 which was introduced from 01.04.2016 and Rule 3 provided an option to pay an amount as determined under subrule (3A) which allowed the appellant to reverse the proportional credit. From the above it is very clear that even if the manufacturer or a provider of service had failed to exercise the option under subrule (3) will be allowed to pay proportionate credit along with the interest at the rate of 15% per annum from the due date for payment of amount till the date of payment. However there is nothing on record to show that the appellant has reversed the entire proportionate credit along with interest therefore the matters needs to be remanded for verifying the same. There are no reason denying the benefit of reversal of proportion CENVAT credit to the appellant - the impugned order is set aside - appeal allowed by way of remand for verification of payment/reversal of the proportional cenvat credit along with interest.

Summary

Issues Involved:
1. Whether the appellant is liable to pay an amount equivalent to 6% or 7% of the value of exempted services u/s Rule 6(3)(i) of the CCR, 2004.
2. Whether the appellant's compliance with Rule 6(3A) of the CCR, 2004 by reversing proportionate credit is sufficient.
3. Whether the penalty and interest imposed u/s 11AC of the Central Excise Act, 1944 are justified.

Summary:

Issue 1: Liability to Pay Amount Equivalent to 6% or 7% of Exempted Services
The appellant, M/s. Suvikram Plastex Private Limited, manufactures excisable goods and also trades goods. The audit revealed that the appellant availed common input services without maintaining separate inventory for taxable and exempted services, necessitating payment of 6% or 7% of the value of the exempted services u/s Rule 6(3)(i) of the CCR, 2004. The authorities demanded Rs.59,62,525/- for the period from July 2014 to June 2017, along with interest and equivalent penalty u/s 11AC of the Central Excise Act, 1944.

Issue 2: Compliance with Rule 6(3A) of the CCR, 2004
The appellant contended that they complied with Rule 6(3A) of the CCR, 2004 by reversing proportionate credit of Rs.1,76,305/- before adjudication. They argued that the order is contrary to the relevant provisions and lacks jurisdiction. The Tribunal noted that the appellant does not regularly trade but only in exceptional cases, and all clearances are recorded in statutory records. The Tribunal referenced the Hon'ble High Court of Telangana and Andhra Pradesh in the case of Tiara Advertising vs. Union of India and the case of Commissioner of Central Excise and Service Tax vs. Rajasthan Prime Steel Processing Centre Private Ltd., which support the appellant's stance that proportionate reversal of credit is sufficient.

Issue 3: Justification of Penalty and Interest
The Tribunal observed that there is no evidence of intention to evade duty, thus invoking the extended period and imposing a penalty is unsustainable. The Tribunal referenced the case of Goenka Pvt. Ltd. vs. Commissioner of Central Goods and Service Tax, New Delhi, which supports the appellant's claim.

Conclusion:
The Tribunal concluded that the appellant should be allowed the benefit of proportionate reversal of CENVAT credit. The impugned order was set aside, and the appeal was allowed by way of remand for verification of payment/reversal of the proportional CENVAT credit along with interest.