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2024 (10) TMI 501 - AT - Central ExciseReversal of proportionate CENVAT Credit attributed to the trading goods - compliance with Rule 6 of CENVAT Credit Rules 2004 regarding maintenance of separate accounts for dutiable and exempted goods - HELD THAT - The demand of CENVAT Credit was raised which is equal to 6% of difference between the purchase price and sale price of trading goods in terms of Rule 6 (3). However it is also not in dispute that the appellant have reversed the proportionate credit along with payment of interest. Therefore after such reversal and payment of interest for the delayed period i.e. from the date of taking credit till the date of reversal of proportionate credit the demand equal to 6% under Rule 6 (3) shall not sustain as held in numerous Judgments. Reliance can be placed in PI INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE ST SURAT-II 2023 (6) TMI 455 - CESTAT AHMEDABAD and C.C.E. S.T. -VADODARA-II VERSUS ALSTOM INDIA LIMITED 2022 (11) TMI 1070 - CESTAT AHMEDABAD where it was held that the demand equal to 6% on the traded goods (exempted service) is not sustainable. The demand is not sustainable. Hence the impugned order is set aside - Appeal allowed.
Issues:
1. Compliance with Rule 6 of CENVAT Credit Rules, 2004 regarding maintenance of separate accounts for dutiable and exempted goods. 2. Demand of CENVAT credit equal to 6% on traded goods. 3. Allegation of suppression of material facts by the Appellant. 4. Imposition of penalty under Section 11AC of the Act. Analysis: Issue 1: Compliance with Rule 6 of CENVAT Credit Rules, 2004 The case involved M/s Jakson Limited, engaged in manufacturing Electric Generating Sets and trading spare parts. The Appellant failed to maintain separate records for input services used in dutiable and exempted goods, as mandated by Rule 6(2) of the Rules. This non-compliance led to the demand of Rs. 1,68,38,813/- under Rule 14 of the Credit Rules. Issue 2: Demand of CENVAT credit equal to 6% on traded goods The Appellant reversed the proportionate CENVAT credit for trading goods along with interest, following Rule 6(3)(2). The Tribunal held that after such reversal and payment of interest, the demand equal to 6% under Rule 6(3) was not sustainable, citing various judgments supporting this position. Issue 3: Allegation of suppression of material facts The Department alleged that the Appellant suppressed material facts by not following the prescribed options under Rule 6(3) and not maintaining separate accounts. This led to the invocation of the extended period of limitation under Section 11A(4) and the imposition of penalty under Section 11AC, as the issue came to light after verification of records. Issue 4: Imposition of penalty under Section 11AC The Tribunal considered the submissions from both sides and found that the demand was not sustainable after the reversal of proportionate credit and payment of interest. Consequently, the imposition of penalty under Section 11AC was set aside, and the appeal was allowed in favor of the Appellant. In conclusion, the Tribunal ruled in favor of the Appellant, setting aside the demand for CENVAT credit equal to 6% on traded goods and the imposition of penalty under Section 11AC. The judgment highlighted the importance of compliance with CENVAT Credit Rules and the consequences of non-compliance, emphasizing the need for maintaining separate accounts for dutiable and exempted goods to avoid disputes and penalties.
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