2015 (11) TMI 372 - AT - Central Excise

CENVAT Credit - credit in respect of input service used in the dutiable and exempted goods but by virtue of retrospective amendment in Rule 6 - appellant had not maintained separate account of input service for exempted and dutiable category of goods - Held that - Since in the present case the amount alongwith 24% interest stand paid within stipulated time period as provided under the retrospective amendment to Rule 6, the only issue left is verification of the quantum of equal amount of Cenvat Credit i.e. ₹ 14,656/- alongwith interest as presented by the appellant. In view of the settled legal position and also on the statutory provisions made under Finance Act, 2010. I am of the considered view that demand confirmed by the original authority and upheld by the Ld. Commissioner (Appeals) alongwith penalties is not sustainable; therefore the same is set aside. However, amount of Cenvat Credit i.e. ₹ 14,656/- alongwith interest @ 24% thereon shall be adjusted from the amount of Cenvat Credit and interest already paid by the appellant. Since the lower authority has not considered quantification of actual amount of Cenvat Credit attributed to the input services used in the manufacture of exempted goods at the time of issuance of show cause notice, Adjudication order and order in appeal, the matter needs to be remitted back to the original authority - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Non-maintenance of separate accounts for input services used in dutiable and exempted goods.
2. Demand for payment equivalent to 10% of the value of exempted goods.
3. Retrospective amendment of Rule 6 by Finance Bill, 2010.
4. Payment of interest and penalty under Section 11AC of the Central Excise Act, 1944.
5. Verification of actual Cenvat Credit attributable to input services used in exempted goods.

Issue-wise Detailed Analysis:

1. Non-maintenance of Separate Accounts for Input Services:
The appellant engaged in manufacturing both dutiable and exempted goods did not maintain separate accounts for input services as required under Rule 6(3)(a) of the Cenvat Credit Rules (CCR), 2004. During an audit, it was observed that the input services on which Cenvat Credit was availed were used for both categories of goods. Consequently, the appellant was held liable to pay an amount equivalent to 10% of the value of the exempted final products cleared.

2. Demand for Payment Equivalent to 10% of the Value of Exempted Goods:
A show cause notice was issued demanding an amount of Rs. 4,61,154/- (10% of the value of exempted goods), along with interest under Section 11AB, and a penalty equal to the demanded amount under Rule 15(3) of CCR, 2004 read with Section 11AC of the Central Excise Act, 1944. The adjudicating authority confirmed this demand and appropriated the amount already paid by the appellant.

3. Retrospective Amendment of Rule 6 by Finance Bill, 2010:
The appellant argued that, according to the retrospective amendment of Rule 6 by Section 73(1) of the Finance Bill, 2010, they were required to pay only an amount equal to the Cenvat Credit attributable to input services used in the manufacture of exempted goods, along with 24% interest. The appellant had already paid Rs. 4,61,154/- and interest of Rs. 1,16,936/- before the issuance of the show cause notice. They contended that the demand should be restricted to the actual Cenvat Credit, which, according to a Chartered Accountant's certificate, amounted to Rs. 14,656/-.

4. Payment of Interest and Penalty under Section 11AC:
The Commissioner (Appeals) upheld the original order but reduced the penalty to Rs. 1,15,300/- as per the first proviso to Section 11AC, given the appellant had paid 25% of the penalty within one month of the original order. The appellant argued that the retrospective amendment should apply, and the demand should be limited to the actual Cenvat Credit attributable to input services used in exempted goods.

5. Verification of Actual Cenvat Credit:
The Tribunal noted that the appellant had paid more than the required amount within the stipulated time and that the retrospective amendment should apply. The Tribunal cited several judgments supporting the appellant's position, including Shree Rama Multi Tech Ltd. vs. Union of India, Commissioner of Central Excise, Salem-I vs. Burn Standard Co. Ltd., and M/s. IPCA Laboratories Ltd. vs. Commissioner of Central Excise, Indore. These judgments established that compliance with the retrospective amendment involves paying the actual Cenvat Credit attributable to input services used in exempted goods along with 24% interest.

The Tribunal concluded that the demand confirmed by the original authority and upheld by the Commissioner (Appeals) was not sustainable. The matter was remitted back to the original authority to verify the actual Cenvat Credit of Rs. 14,656/- and interest thereon. The amount already paid by the appellant would be adjusted against this verified amount, and any balance could be claimed as a refund.

Conclusion:
The appeal was allowed by way of remand to the adjudicating authority for verification of the actual Cenvat Credit and interest. The Tribunal set aside the demand and penalties imposed by the original authority and Commissioner (Appeals), ensuring compliance with the retrospective amendment provisions.