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2018 (4) TMI 287 - AT - Central ExciseCENVAT credit - common inputs used for manufacture of dutiable as well as non-dutiable goods - furnace oil - non-maintenance of separate records - Rule 6(1) of CCR 2001, 2002 and 2004 - Held that - the appellant has no case on merit in view of the judgment of the Hon ble Gujarat High Court in the case of CCE vs. Deeyakar Aluminium Pvt. Ltd. 2011 (3) TMI 1596 - GUJARAT HIGH COURT , where it was held that CENVAT credit on furnace oil is not admissible. Time limitation - Held that - the demand for the period from 30.1.2002 to 30.11.2005 is time barred and the same is set aside and the appellant is liable to pay the duty for the period from December 2005 to October 2006 and for the purpose of quantification of duty for the normal period, the case is remanded back to the original authority to re-quantify the demand for the normal period along with interest. Appeal allowed in part by way of remand.
Issues:
1. Eligibility of CENVAT credit on inputs used for manufacturing dutiable and exempted goods. 2. Reversal of credit on fuel used in the manufacture of exempted goods. 3. Imposition of penalties under Section 11AC. 4. Invocation of extended period of limitation. 5. Admissibility of CENVAT credit on furnace oil. Analysis: 1. The appeal challenged the Commissioner's order confirming the demand but dropping the penalties imposed. The appellant, a manufacturer of Ayurvedic medicines, availed CENVAT credit on inputs including fuel used for both dutiable and exempted goods. The issue was whether the appellant was eligible for such credit under Rule 6 of the CENVAT Credit Rules, 2001, 2002, and 2004. The demand was raised for not reversing the credit on fuel used in the manufacture of exempted goods. The Commissioner upheld the demand but dropped penalties imposed under Section 11AC. 2. The appellant argued that since penalties under Section 11AC were dropped, the extended period of limitation could not be invoked. The appellant contended that the issue of reversing proportionate credit for exempted products was pending before the Supreme Court. The appellant relied on precedents where it was held that confusion regarding interpretation prevented the invocation of the extended period. The Revenue defended the order citing a Gujarat High Court decision. 3. The Tribunal found no merit in the appellant's case based on the Gujarat High Court judgment. Regarding limitation, as the penalty under Section 11AC was dropped and no appeal was filed by the Revenue, the extended period was considered time-barred. The Tribunal noted that the Commissioner did not address the extended period in the order. Relying on precedents, the Tribunal held that when penalties are dropped, the extended period cannot be invoked. The demand for the period up to November 2005 was set aside, and the appellant was directed to pay duty for the subsequent period. The case was remanded for re-quantification of the demand for the normal period. 4. The Tribunal emphasized compliance with natural justice principles and partially allowed the appeal, setting aside the demand for the extended period. The judgment was pronounced on 28/03/2018 by the Tribunal.
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