2024 (6) TMI 296 - AT - Central Excise

Liability to pay an amount equal to 5%/ 10% of the value of the exempted goods under the Rule 6 (i) of Cenvat Credit Rules, 2004 - non-maintenance of separate records - proportionate credit in terms of Rule 6(3A) of Cenvat Credit Rules, 2004 reversed - interest in case of delay also paid - HELD THAT - There is no dispute that the appellant have paid the proportionate credit in respect of the exempted goods in terms of 6(3A) of Cenvat Credit Rules,2004 along with the interest wherever there is a delay. Therefore, as per the settled legal position in various judgments particularly in the case of appellant vide Tribunal sOrder No. A/10312/2022 dated 05/04/2022 2022 (4) TMI 475 - CESTAT AHMEDABAD the demand is not sustainable. In view of the above order coupled with a catena of judgments, whereby, it was consistently held that when proportionate Cenvat Credit attributed to exempted goods has been reversed and interest was also paid in case of delay in reversal, the demand of 5%/ 10% in terms of Rule 6(3)(i) of Cenvat Credit Rules will not sustain. Therefore, following the juridical decision in various judgments and also on the judgment in the above order of Tribunal in the appellant s own case the proposal of present demand in show cause notice is not sustainable. The impugned order passed by the Adjudicating Authority is proper and legal which does not require any interference - appeal of Revenue dismissed.

Issues:
Whether the appellant is liable to pay an amount equal to 5%/10% of the value of exempted goods under Rule 6(i) of Cenvat Credit Rules, 2004 when they have been reversing the proportionate credit and paying interest in case of delay, as per Rule 6(3A) of Cenvat Credit Rules, 2004.

Analysis:
The issue in the present case revolves around the liability of the appellant to pay 5%/10% of the value of exempted goods under Rule 6(i) of Cenvat Credit Rules, 2004. The Revenue contends that since the appellant did not maintain separate records, they are obligated to make the payment. However, the respondent argues that the appellant has reversed the proportionate credit and paid interest for delays, citing a previous Tribunal order that supports their position. The Tribunal notes that the demand was raised by the Revenue due to the lack of separate records, but acknowledges that the appellant has complied with Rule 6(3A) by paying the proportionate credit and interest, rendering the demand unsustainable based on legal precedents and the settled position in various judgments.

Furthermore, the appellant emphasizes that the procedural lapse of not filing a declaration should not impact the Revenue implication, as the appellant has effectively reversed the credit and paid interest, akin to not availing credit. The Tribunal concurs with this argument, citing the Supreme Court's stance that reversal of credit with interest equates to non-availment of credit. Additionally, the Tribunal asserts that the appellant's failure to file a declaration should not hinder the benefit of proportionate credit reversal, as the necessary information was available to the department despite the formal lapse. The Tribunal ultimately sets aside the impugned order, allowing the appeal on the grounds that the appellant has appropriately reversed the credit and paid interest, thus precluding any further payment demand from the appellant.

In conclusion, the Tribunal dismisses the Revenue's appeal, upholding the impugned order as proper and legal, without requiring any interference. The decision is based on the consistent legal precedent that when proportionate credit for exempted goods is reversed with interest, the demand under Rule 6(3)(i) of Cenvat Credit Rules is not sustainable. The judgment in the present case aligns with previous jurisprudence and the Tribunal's own ruling in the appellant's case, rendering the proposed demand in the show cause notice invalid.

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