2014 (8) TMI 495 - AT - Central Excise

Denial of CENVAT Credit - Manufacture of dutiable and exempted goods by using common input Naphtha separate accounts not maintained Revenue demands 10% of the value of the exempted goods in terms of rule 6(3) and which amount is ₹ 3.55 crores & ₹ 2.15 crores respectively - Held that - law was retrospectively amended for providing for reversal of credit attributable to inputs used in the manufacture of exempted goods and if reversal was done along with interest for such delayed reversal, the provisions for demanding amount @ 10% of the value of the exempted goods would not apply. In the present case, the appellant has reversed the credit, though belatedly, in respect of the inputs alleged to have been used in the manufacture of exempted product. There is no doubt that they have done the reversal but they have paid interest @ 13%, which was the prevalent rate at such time. As per the provisions of Finance Act, 2010 the reversal has to be done along with the interest liability @ 24% per annum from the due date of reversal till the actual date of reversal of credit. To that extent, the contention of the Revenue that interest liability should be discharged @ 24% per annum is sustainable. Verification of the quantum of credit - Held that - If the credit has not been reversed, the same was ordered to be done within a period of four weeks from the date of receipt of communication. The said ratio applies to the facts of the present case also. Even though, the appellant has not filed any application as stipulated in the Finance Act, 2010 in the present case, inasmuch as they have reversed the credit of duty paid on naphtha used in the manufacture of exempted goods, the same benefit should be granted to the appellant subject to terms and condition prescribed thereunder. It is an admitted position that the appellant as reversed the credit. The appellant is directed to discharge interest liability @ 24% per annum from the due date of reversal of credit to the actual date of reversal done by them in accordance with law. The applicant is directed to produce a C.A. certificate certifying the credit required to be reversed and the credit actually reversed along with interest thereon. On submission of such certificate, the adjudicating authority shall reconsider the matter and grant the benefit provided in the Finance Act, 2010 with respect to reversal of credit on inputs used in the manufacture of exempted product. - Decided in favour of assessee.

Issues:
1. Duty demand confirmation for exempted products.
2. Availing CENVAT Credit on duty paid naphtha.
3. Reversal of credit and interest payment.
4. Compliance with Rule 6(3) of Cenvat Credit Rules, 2004.
5. Applicability of Finance Act, 2010.
6. Verification of credit reversal amount.
7. Production of C.A. Certificate for credit reversal.
8. Impact of the Finance Act, 2010 on previous judgments.

Issue 1: Duty Demand Confirmation for Exempted Products
The judgment involves an appeal against an Order-in-Original confirming a duty demand of specific amounts for the value of exempted products during certain periods. The appellant, a fertilizer manufacturer, faced penalties and interest on the duty demand confirmed by the adjudicating authority.

Issue 2: Availing CENVAT Credit on Duty Paid Naphtha
The appellant used duty paid naphtha as an input for manufacturing dutiable and exempted goods. The contention was that the appellant should not have availed CENVAT Credit on naphtha used in manufacturing exempted fertilizer. The appellant claimed to have reversed the credit amount along with interest attributable to naphtha used in manufacturing fertilizers.

Issue 3: Reversal of Credit and Interest Payment
The appellant argued that by reversing the credit, they did not avail it, thus not liable to pay under Rule 6(3) of Cenvat Credit Rules, 2004. They cited compliance with interest payment at the prevailing rate before the Finance Act, 2010 enactment. The appellant claimed to have been reversing credits monthly since August 2009, meeting legal requirements.

Issue 4: Compliance with Rule 6(3) of Cenvat Credit Rules, 2004
The Revenue contended that the appellant's credit reversal was delayed, not complying with clearance time requirements. The appellant was required to discharge a sum for exempted goods based on the Revenue's interpretation of the rules and relevant court decisions.

Issue 5: Applicability of Finance Act, 2010
The judgment discussed the retrospective amendment by the Finance Act, 2010, allowing reversal of credit with interest to avoid demanding amounts for exempted goods. The court analyzed the timing and interest rates concerning the appellant's credit reversal actions.

Issue 6: Verification of Credit Reversal Amount
Although the appellant claimed correct credit reversal, the Revenue did not verify it. The court referred to a similar case directing the appellant to provide a certificate from a Chartered Accountant certifying the credit reversal amount for exempted goods.

Issue 7: Production of C.A. Certificate for Credit Reversal
The court directed the appellant to produce a C.A. certificate certifying the credit reversal amount and interest. Compliance with this requirement would result in reconsideration by the adjudicating authority for granting benefits under the Finance Act, 2010.

Issue 8: Impact of the Finance Act, 2010 on Previous Judgments
The court clarified that the amendment by the Finance Act, 2010 superseded previous judgments like the one cited by the Revenue. The appellant was allowed benefits under the amended law, and the appeal was remanded with the stay petition being disposed of.

← Previous Next →