2015 (9) TMI 1320 - AT - Central Excise

Denial of CENVAT Credit - Availment of Credit on exempted product - appellant reversed the proportionate credit used in the manufacture of the exempted final product alongwith interest - Held that - Appellant reversed the proportionate credit used in the manufacture of the exempted final product and informed the Department by letter dated 16.01.2012. They have given the calculation sheet as per Rule 6(3A) of the said Rules. The Adjudicating Authority had not examined this letter in proper manner. In our considered view, the Adjudicating Authority is required to examine the reversal of credit alongwith interest as per provision under Rule 6(3A) of the said Rules. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Availment of CENVAT credit on exempted final products contrary to Rule 6(2) of Cenvat Credit Rules, 2004.
2. Propriety of demand for reversal of credit on exempted goods.
3. Interpretation of Rule 6(3A) of Cenvat Credit Rules, 2004.
4. Examination of reversal of credit along with interest by the Adjudicating Authority.
5. Applicability of case laws - M/s Mercedes Benz India (P) Limited vs. Commissioner of Central Excise, Pune-I and Commissioner of Central Excise, Thane -I vs. Nicholas Piramal (India) Ltd.

Analysis:
1. The appellant was involved in manufacturing P & P Medicaments classifiable under Chapter 30 of the Central Excise Tariff Act 1985, clearing both dutiable and exempted final products. They availed CENVAT credit on exempted final products, which was against Rule 6(2) of the Cenvat Credit Rules, 2004. The appellant reversed the proportionate credit utilized in the manufacture of exempted final products along with interest and informed the Department accordingly.

2. The main contention was that since the appellant had already reversed the credit along with interest on the exempted final products, the demand for the reversal of the amount based on the value of exempted goods, as confirmed in the adjudication order, was not justified. Reference was made to the decision in the case of M/s Mercedes Benz India (P) Limited vs. Commissioner of Central Excise, Pune-I, which was deemed applicable before and after the amendment of Rule 6 Rules, 2004. The Revenue, however, relied on the decision of the Bombay High Court in the case of Commissioner of Central Excise, Thane -I vs. Nicholas Piramal (India) Ltd.

3. Upon reviewing the impugned order, it was observed that the Adjudicating Authority had not properly examined the appellant's reversal of credit along with interest as per Rule 6(3A) of the Cenvat Credit Rules, 2004. The Tribunal held that the Authority needed to assess this aspect in accordance with the provisions under Rule 6(3A) before confirming any demand.

4. Consequently, the Tribunal set aside the impugned order and remanded the matter to the Adjudicating Authority for a fresh decision, emphasizing the need to consider the appellant's reversal of credit along with interest as per Rule 6(3A) and the relevant case laws cited. It was specified that all issues in the matter should be re-evaluated, and the Adjudicating Authority must provide a proper opportunity for a hearing before issuing a new order. The appeal by the appellant was allowed on remand, while the application for an extension of the stay order was dismissed as unnecessary.