2024 (11) TMI 663 - AT - Central Excise

Reversal of common Cenvat Credit for exempted goods - demand of 5/6% of the value of exempted goods - HELD THAT - It is seen that the impugned order has been passed by the Adjudicating Authority as per the directions of the this Bench vide Final Order No. A/55751/2016 dated 08/12/2016 2016 (12) TMI 841 - CESTAT NEW DELHI . In this Order, the Tribunal has held ' the failure of the appellant to follow the procedure perfectly should not come in the way of extending the substantial benefit of proportionate reversal. However, we find that in the order passed by the lower authority, he has not given any finding as to whether the reversal already made satisfies the test of proportionate reversal in terms of quantum of reversal. Hence, we are of the considered opinion that the matter is to be remanded to the original adjudicating authority to verify whether the amount of Cenvat credit already reversed along with interest satisfies the requirement of proportionate reversal.' It is seen from the impugned order that the Adjudicating Authority has verified all the documents placed before him and has passed very detailed order. He has considered the Cost Account s Certificates and has relied on the decision of Hyderabad Tribunal in the case of Aster Pvt. Ltd. Vs. Commr. of Central Excise, Hyderabad 2016 (6) TMI 866 - CESTAT HYDERABAD Madras High Court in the case of Pepsico holdings 2015 (8) TMI 249 - MADRAS HIGH COURT to come to conclusion that demand of 5/6% of the exempted value is not legally sustainable. The Adjudicating Authority has followed the directions of this Tribunal s Order and applied the ratio of the relevant case laws and all the facts were verified by the Range office. Only after this he has passed the impugned order in a considerable detailed manner. There are no reason to interfere with the same - the appeal filed by the Revenue dismissed.

Summary

Issues:
1. Whether the appellant correctly reversed the common Cenvat Credit for exempted goods.
2. Whether the Adjudicating Authority correctly quantified the Cenvat to be reversed.
3. Whether the demand of 5/6% of the value of exempted goods is legally sustainable.

Analysis:
1. The appellants, manufacturers of Iron and Steel Ductile Iron Pipes, were issued Show Cause Notices by the Revenue for utilizing exemption notifications to clear goods both with and without duty payment. The Adjudicating Authority confirmed a demand for Cenvat taken on exempted goods. The Tribunal previously remanded the matter for the appellant to reverse common Cenvat Credit for exempted goods. The Adjudicating Authority confirmed a reduced demand, leading to the Revenue's appeal.

2. The Revenue argued that the appellant did not fulfill Rule 6(3) conditions and failed to reverse Cenvat Credit for common inputs. The Adjudicating Authority was criticized for accepting the appellant's Cenvat Credit reversal to drop the balance demand. The Respondent contended that the Tribunal's previous direction was followed correctly, citing a relevant case law. The Adjudicating Authority quantified the reversed Cenvat and dropped the balance demand, which the Respondent argued was legally sustainable.

3. The Tribunal's previous order directed the Adjudicating Authority to verify the appellant's reversal of Cenvat Credit for common inputs. The Authority's detailed order considered Cost Accountant's Certificates and case laws to conclude that the demand of 5/6% of exempted value was not legally sustainable. The Authority verified all documents, including a ratio analysis, and confirmed the correctness of the appellant's input calculations. The Adjudicating Authority's order was detailed and followed the Tribunal's directions, leading to the dismissal of the Revenue's appeal.

This judgment highlights the importance of correctly reversing Cenvat Credit for exempted goods, the Adjudicating Authority's duty to follow Tribunal directions, and the legal sustainability of demands based on exempted goods' value. The detailed analysis and adherence to legal principles ensure a fair and just outcome in tax matters.