2017 (11) TMI 1446 - AT - Central Excise

CENVAT credit - demand of 10% of the exempted final product on the ground of improper availment of CENVAT credit - common input services used in dutiable as well as exempted final products - non-maintenance of separate records - Held that - it is well settled law that full reversal of credit alongwith interest should be considered as if that the appellant did not avail any credit on such product - the decision in the case of Chandrapur Magnet Wires (P) Ltd. Vs. Collector 1995 (12) TMI 72 - SUPREME COURT OF INDIA relied upon - full reversal of credit alongwith applicable interest will satisfy the compliance of Rule 6 and will not attract payment of 10% of the exempted final product - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Condonation of delay in filing the appeal
- Demand of 10% of the value of exempted final products under Rule 6(3)(b) of Cenvat Credit Rules, 2004
- Maintenance of separate records for common input services
- Applicability of full reversal of credit along with interest in determining compliance with Rule 6

Condonation of Delay:
The Tribunal condoned a 10-day delay in filing the appeal based on the reasons mentioned in the application. Both sides consented to proceed with the appeal hearing after the delay was condoned.

Demand of 10% of Exempted Final Products:
The appellant, engaged in manufacturing HDPE pipes liable to Central Excise duty, also produced exempted pipes for sprinkler irrigation equipment. Due to not maintaining separate accounts for input and input services in dutiable and exempted products, proceedings were initiated to demand 10% of the value of exempted final products under Rule 6(3)(b) of the Cenvat Credit Rules, 2004. The original authority ordered recovery of the demanded amount along with an equal penalty under Rule 15(2).

Maintenance of Separate Records for Common Input Services:
The appellant did not maintain separate records for common input services used in both dutiable and exempted final products. The appellant reversed the full credit availed on such common input services along with applicable interest when the issue was raised during proceedings. The Revenue argued that non-maintenance of records for common input services justified the demand under Rule 6(3)(b).

Applicability of Full Reversal of Credit in Compliance with Rule 6:
The Tribunal considered various decisions, including Chandrapur Magnet Wires (P) Ltd. Vs. Collector, Hello Minerals Water Pvt. Ltd. Vs. Union of India, and Jost's Engineering Co. Ltd. CCE, Mumbai, to establish that full reversal of credit along with interest should be deemed as not availing any credit. Relying on these precedents, the Tribunal found merit in the appeal and set aside the impugned order, concluding that full reversal of credit with interest satisfied the compliance of Rule 6 and negated the need to pay 10% of the exempted final product value.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by both sides, and the legal reasoning behind the Tribunal's decision to allow the appeal and set aside the demand for 10% of the exempted final product value.