2013 (8) TMI 345 - AT - Central Excise

Cenvat Credit - Common input - Held that - common input was used for manufacture of dutiable and exempted goods - if proportionate credit is reversed, assessee shall not be directed to deposit a percentage of sale prices - appellant had enjoyed credit for one year at the cost of Exchequer. Therefore, penalty to that extent shall be paid - Decided in favour of Revenue.

Summary

Issues:
- Appeal against enjoyment of cenvat credit on common input for manufacturing dutiable and exempted goods
- Dispute over duty element involved and re-crediting balance amount
- Applicability of proportionate credit reversal and penalty imposition

Analysis:
The judgment deals with an appeal regarding the enjoyment of cenvat credit by the assessee on a common input used for manufacturing both dutiable and exempted goods. The Revenue contested this, arguing that a specific percentage should apply to the sale price for recovery. The duty element involved was determined by the ld. Commissioner (Appeals) to be Rs.77,876, which was the subject of dispute. The ld. Appellate authority intervened to resolve the issue by directing the balance amount of Rs.35,761 to be re-credited to the appellant's account, considering the amount already deposited during the enquiry.

Upon review of the orders of both lower authorities, the Tribunal acknowledged that the common input was indeed used for both dutiable and exempted goods. The Tribunal opined that by reversing the proportionate credit of Rs.77,876, as confirmed by the ld. Commissioner (Appeals), the demand should be sustained to that extent. Consequently, a refund of Rs.35,761 was deemed appropriate. However, the Tribunal noted that the appellant had enjoyed the credit for a year at the expense of the Exchequer, leading to the decision that a penalty should be imposed. Therefore, the Tribunal directed the amount of Rs.35,761 to be treated as a penalty by the Department, instructing the respondent to reverse this amount in the RG 23 record and notify the Department within a month for proper accounting.

In conclusion, the Revenue's appeal was partly allowed, with a penalty of Rs.35,761 being levied on the appellant for the cenvat credit issue. The judgment emphasizes the importance of proportionate credit reversal in cases involving common inputs for dutiable and exempted goods, ensuring compliance with regulations and imposing penalties for any violations detected during the process.