2024 (6) TMI 491 - AT - Central Excise

Reversal of CENVAT Credit - services used in or in relation to manufacture of dutiable final products and for exempted services, as provided in Rule 6 of Cenvat Credit Rules, 2004 - non-maintenance of separate records/inventory for the inputs/ input services - HELD THAT - In case of CCE, DELHI VERSUS M/S INDRAPRASTHA GAS LIMITED 2017 (11) TMI 1391 - CESTAT NEW DELHI Delhi Bench in identical case while dismissing the appeal filed by the revenue, observed 'identical issue decided in the case of CST, DELHI VERSUS MACHINE TOOLS (I) PVT LTD 2017 (8) TMI 833 - CESTAT NEW DELHI , where it was held that it is clear that no credit is available on any input service attributable to trading during the material time. When no such credit is eligible, the respondent cannot avail the benefit of cenvat credit scheme.' There are no merits in the impugned order - appeal allowed.

Issues Involved:
1. Demand and recovery of Rs. 8,23,01,521.00 u/s 73(1) of the Finance Act, 1994 read with Rule 14 and Rule 6(3)(i) of the Cenvat Credit Rules, 2004.
2. Recovery of interest u/s 75 of the Finance Act, 1994.
3. Imposition of penalties u/s 77(1)(a), 77(1)(b), 77(1)(c), 77(1)(d), 77(2), and 78 of the Finance Act, 1994.
4. Non-imposition of penalty u/s 76 of the Finance Act, 1994.

Summary:

1. Demand and Recovery of Rs. 8,23,01,521.00:
The Tribunal examined whether the amount of Rs. 8,23,01,521.00 is demandable and recoverable u/s 73(1) of the Finance Act, 1994 read with Rule 14 and Rule 6(3)(i) of the Cenvat Credit Rules, 2004. The appellant did not maintain separate records for inputs/input services used for both dutiable and exempted services as mandated by Rule 6 of the Cenvat Credit Rules, 2004. The appellant contended that they reversed the credit proportionately, but the Tribunal found that the procedure under Rule 6(3A) was not followed, making the demand valid.

2. Recovery of Interest:
The Tribunal upheld the recovery of interest on the aforesaid amount u/s 75 of the Finance Act, 1994, as the appellant failed to maintain separate accounts and did not follow the prescribed procedure for reversal of credit.

3. Imposition of Penalties:
The Tribunal examined the imposition of various penalties:
- u/s 77(1)(a): A penalty of Rs. 200/- per day was imposed for failure to take registration.
- u/s 77(1)(b): A penalty of Rs. 10,000/- was imposed for violation of Rule 5 of the Service Tax Rules, 1994.
- u/s 77(1)(c): A penalty of Rs. 10,000/- was imposed for failure to furnish the desired information timely.
- u/s 77(1)(d): A penalty of Rs. 10,000/- was imposed for failure to deposit service tax within the stipulated time.
- u/s 77(2): A penalty of Rs. 10,000/- was imposed for violation of Rule 7 of the Service Tax Rules, 1994.
- u/s 78: A penalty equal to the demand amount of Rs. 8,23,01,521.00 was imposed for contravention of various provisions.

4. Non-imposition of Penalty u/s 76:
The Tribunal noted that no penalty was imposed u/s 76 of the Finance Act, 1994, due to the amendment in Section 78 for the period under consideration starting from 10th May 2008 onwards.

Conclusion:
The appeal was allowed by the Tribunal, setting aside the impugned order, as the issue was covered by the decision of the Delhi Bench in the case of Indraprasth Gas Limited, where it was held that the appellant's reversal of proportionate credit was sufficient and the demand for 6% under Rule 6(3)(i) was not sustainable. The Tribunal found no merits in the impugned order and allowed the appeal.

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