2017 (3) TMI 1401 - AT - Central Excise

CENVAT credit - manufacture of dutiable as well as exempted goods - non-maintenance of separate set of books - recovery of 10% of the value of the clearances of the exempted products - Held that - the Chartered Accountant certificate shows that the respondent has used commonly only security services and telephone services amounting to ₹ 1,46,680/- for both dutiable and exempted products. The proportionate credit availed on these services to the tune of ₹ 4,312/- has been reversed by the respondents. That therefore the demand of 10% of the value of the exempted goods is not proper - reliance placed in the case of Chandrapur Magnet Wires (P) Ltd. Vs. CCE, Nagpur 1995 (12) TMI 72 - SUPREME COURT OF INDIA - appeal dismissed - decided in favor of assessee.

Summary

Issues Involved:
Department's appeal against setting aside of demand, interest, and penalty by Commissioner(Appeals) due to failure to maintain separate accounts for common input services used for manufacturing dutiable and exempted products.

Detailed Analysis:

Issue 1: Failure to Maintain Separate Accounts
The Department contended that the respondent did not maintain separate accounts for common input services used for manufacturing dutiable and exempted products. The Commissioner(Appeals) accepted the respondent's argument that they only used security and telephone services commonly for both types of products. The Department argued that the reversal of credit by the respondent was insufficient compliance with Rule 6 of the CENVAT Credit Rules 2004 due to the absence of separate accounts.

Issue 2: Interpretation of Rule 6(3A)
The consultant for the respondent highlighted the introduction of Section 6(3A) post-March 2008, allowing manufacturers to reverse proportionate credit for common inputs used in exempted product manufacturing. The consultant argued that despite not maintaining separate accounts, the respondent's reversal of credit should suffice, citing judgments like Ballarpur Industries and emphasizing the relevance of Rule 6(3A) over previous decisions.

Issue 3: Analysis of Impugned Order
The Commissioner(Appeals) detailed the respondent's usage of common services, the proportionate credit reversal, and the subsequent demand for 10% of the exempted goods' value. Relying on precedents like Asian Fertilisers Ltd., the Commissioner(Appeals) found the demand improper and settled the issue based on legal interpretations and judgments from higher courts.

Conclusion:
The Tribunal, following the Commissioner(Appeals) analysis and legal precedents, dismissed the Department's appeal, deeming it devoid of merits. The judgment emphasized the importance of Rule 6(3A) post-March 2008 and the sufficiency of credit reversal for common inputs, ultimately upholding the decision to set aside the demand, interest, and penalty imposed by the original authority.