2017 (11) TMI 437 - AT - Central Excise

CENVAT credit - manufacture of dutiable as well as exempt goods - non-maintenance of separate records - Held that - the appellant has reversed the amount before issuance of SCN - in considering the explanation of the electricity used for sale to the Karnataka State Grid the unit produced was considered whereas it should be the value of sale and not the unit in question which should have been considered - the entire issue hinges on an error made on calculation and therefore appears to be a computation mistake which needs to be re-computed. This case needs to be remanded back to the original authority which will determine the amount which is required to be reversed - appeal allowed by way of remand.

Summary

Issues:
Appeals against Order-in-Original upholding cenvat credit demands and penalties.

Analysis:
The appeals were filed challenging an order upholding demands and penalties related to cenvat credit availed by the appellants, who are manufacturers of various goods including sugar, molasses, and ethanol. The appellants were found to be availing cenvat credit on input services used in the manufacture of both excisable and non-excisable goods without maintaining separate accounts as required by Cenvat Credit Rules 2004. The adjudicating authority confirmed demands, imposed penalties, and ordered the reversal of wrongly availed credit. A penalty was also imposed on the General Manager under Rule 26 of Central Excise Rules, 2002. The Commissioner (Appeals) disposed of both appeals through a common order, leading to the current consolidated appeal.

The appellant contended that the impugned order did not consider their submissions and was contrary to judicial precedents. They argued that the adjudicating authority failed to comply with relevant rules regarding cenvat credit eligibility for inputs and input services used in sugar production. The appellant also disputed the penalty imposed on the General Manager, claiming no violation of statutory provisions. They highlighted discrepancies in the methodology used for determining the proportionate credit to be reversed, citing judicial decisions supporting their position.

The Appellate Tribunal analyzed the submissions, material on record, and relevant case laws. It noted that the appellant had already reversed a significant amount before the show-cause notice issuance. The Tribunal found errors in the calculation methodology used, emphasizing the need to consider the value of sale rather than units produced when dealing with electricity for sale. Referring to a previous case, the Tribunal highlighted the importance of establishing a nexus between input services and electricity generation for credit reversal. Consequently, the Tribunal remanded the case to the original authority for re-computation of the demand after giving the appellant an opportunity to provide evidence of the lack of nexus between inputs/input services and electricity generation.

In conclusion, the Tribunal set aside the impugned order and directed the original authority to re-compute the demand within three months while ensuring compliance with principles of natural justice. The case was remanded for a fresh decision based on the revised computation, allowing the appellant to establish the absence of nexus between certain inputs/input services and electricity generation.