2016 (3) TMI 198 - AT - Central Excise

Cenvat Credit - Non maintaining of separate accounts - extended period of limitation invoked - inputs used in the manufacture of finished goods cleared on payment of duty and for inputs used in the manufacture of exempted finished goods as required under Rule 6(2) of the Cenvat Credit Rules - Held that - Assessee has attached various correspondence along with their written submissions which show that the respondent has been maintaining separate records with respect to the input which is used for manufacture of excisable goods as well as inputs which are used for manufacture of exempted goods. They have also annexed the copy of the cenvat credit account registers. Further find that the learned adjudicating authority has found that though the respondent has maintained the separate accounts but not as per the requirement of the law. In fact no specific form has been prescribed in which separate accounts have to be maintained whereas the respondent has shown by production of their registers and documents that they have been separately maintaining records with regard to most of the inputs. Further, the demand pertains to the period May 2004 to September 2005 and the show cause notice was issued on 1.7.2008 i.e. after a period of four years, wherein the respondent in a number of letters exchanged between them and the department, clearly stated regarding the availment of exemption and maintenance of accounts and furnishing of the required return. As there is no fraud or suppression of fact involved in this case as the department was all along kept informed of the respondent s activity and therefore there is no reason for justification of invoking the extended period of limitation. - Decided against revenue

Summary

Issues:
- Appeal against the order of the Commissioner (Appeals) setting aside the order-in-original dated 31.3.2009.
- Allegation of not maintaining separate accounts for inputs used in the manufacture of finished goods cleared on payment of duty and exempted finished goods.
- Demand of duty, interest, and penalty under Section 11AC of the Central Excise Act.
- Dispute over the application of Rule 6(3)(b) regarding payment of duty where common inputs are used for dutiable and duty-free goods.
- Argument on maintaining separate accounts and reversal of cenvat credit.
- Interpretation of judgments by the Hon'ble Supreme Court and the Hon'ble Bombay High Court in similar cases.

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI arose from the Commissioner (Appeals) setting aside the order-in-original dated 31.3.2009. The case involved the respondent's alleged failure to maintain separate accounts for inputs used in the manufacture of finished goods cleared on payment of duty and exempted finished goods. The department issued a show cause notice for demand of duty, interest, and penalty under Section 11AC of the Central Excise Act, which was confirmed by the Joint Commissioner. The Commissioner (Appeals) reversed this decision, leading to the department's appeal.

The department argued that the Commissioner (Appeals) erred in ignoring Rule 6(3)(b) regarding the payment of duty where common inputs are used for dutiable and duty-free goods. They also contested the acceptance of the respondent's claim of maintaining separate accounts and reversal of cenvat credit. The department highlighted the absence of verification due to the closure of the respondent's factory and disputed the applicability of certain judgments, distinguishing them based on factual differences.

On the other hand, the respondent's counsel defended the Commissioner (Appeals)'s order, emphasizing the non-availment of credit on certain inputs and subsequent reversal of credit on dutiable inputs used in manufacturing exempted goods. They presented evidence of maintaining separate accounts and detailed explanations of transactions mentioned in the show cause notice, which the department failed to refute with concrete evidence. The respondent cited relevant case laws to support their position and argued against the department's contentions regarding the judgments cited.

The Tribunal examined the records and found that the Commissioner (Appeals) was convinced of the respondent's compliance with maintaining separate accounts. The respondent's submissions, supported by correspondence and records, demonstrated their adherence to the requirements. The Tribunal noted the absence of fraud or suppression of facts, emphasizing the respondent's timely communication with the department. Referring to precedents, the Tribunal concluded that the extended period of limitation could not be invoked in this case. Ultimately, the Tribunal upheld the Commissioner (Appeals)'s order, dismissing the appeal of the Revenue.