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2024 (5) TMI 1389 - AT - Central ExciseReversal of proportional credit on clearance of 27923531 kgs of medical grade oxygen - non-maintenance of separate records as prescribed in rule 6 of CENVAT Credit Rules, 2004 - HELD THAT - In re Mercedes Benz India (P) Ltd 2015 (8) TMI 24 - CESTAT MUMBAI pertaining to disputed credit to be reversed between April 2011 to February 2012, and intimated reversal in March 2012, the Tribunal had held that ' Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. ' There is no merit in the impugned order which is set aside - Appeal of assessee allowed.
Issues:
Limited issue in appeal against order directing recovery of amount allegedly not reversed as required under CENVAT Credit Rules, 2004. Analysis: The appeal involved a limited issue concerning the chargeability of the reversal at the notified rate on the total value of exempted goods cleared between February 2007 and March 2011 under rule 6(3) of CENVAT Credit Rules, 2004. The appellant, a manufacturer of steel products, was directed to recover a specific amount for not reversing the credit proportionate to the clearance of 'medical grade' oxygen. The appellant argued compliance with the reversal requirement before the show cause notice was sufficient to preclude resorting to rule 14 of CENVAT Credit Rules, 2004. The appellant also contended that they had not maintained separate records as required by rule 6 and could not benefit from the amendment of the rule due to a late request. The Tribunal referred to various decisions to support the appellant's arguments regarding the exercise of options under rule 6(3) of the CENVAT Credit Rules, 2004. The Tribunal analyzed the appellant's compliance with the requirements of rule 6(3)(ii) of the CENVAT Credit Rules, 2004, and found that the appellant had opted for the option provided under this rule. The Tribunal emphasized that the appellant had the liberty to choose the option and that the Revenue could not insist on a particular option. The Tribunal also noted that the objective of Rule 6 was to prevent availing CENVAT Credit for exempted goods and services, and the amount to be recovered should not exceed the credit attributed to the exempted goods. The Tribunal concluded that the demand for a substantial amount from the appellant was not justified, and the impugned order was set aside to allow the appeal of the assessee. In a separate judgment, the Tribunal referred to a similar case involving the exercise of options under Rule 6(3A) of the CENVAT Credit Rules, 2004. The Tribunal held that failure to intimate the option in writing did not deprive the appellant of the right to avail the second option of reversing the proportionate credit. The Tribunal emphasized that the procedural lapse of not intimating the option did not restrict the appellant to only the first option under Rule 6(3)(i). The Tribunal found the demand raised by the Revenue to be improper and beyond the limitation period, ultimately setting aside the impugned order and allowing the appeal of the appellant. In conclusion, the Tribunal found no merit in the impugned order and set it aside to allow the appeal of the assessee. The judgments cited in support of the appellant's arguments were crucial in establishing the compliance and rights of the appellant under the CENVAT Credit Rules, 2004.
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