2018 (4) TMI 655 - AT - Central Excise

CENVAT credit - whether the appellant is required to pay an amount equivalent to 6% of the value of the goods cleared which the department claims as trading activity or otherwise? - Held that - If an input is cleared from the factory of the appellant on reversal of CENVAT credit availed on such inputs, the question of invoking the provisions of Rule 6(3A) of the CENVAT Credit Rules, 2004 does not arise as per the ratio laid down by the Tribunal in the case of Commissioner of Central Excise, Ghaziabad v. U. P. Telelinks 2015 (10) TMI 1156 - CESTAT NEW DELHI , where it was held that assessee is not required to pay any amount equivalent to 6% /8% of the value of inputs cleared as such or reversal of proportional credit attributable to input cleared - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellant is required to pay an amount equivalent to 6% of the value of the goods cleared, which the department claims as trading activity or otherwise.

Analysis:
The appeal was against an order demanding payment equivalent to 6% of the value of goods cleared by the appellant, alleging trading activity. The appellant, a battery manufacturer, procured polypropylene co-polymer (PPCP) on which duty was discharged and CENVAT credit availed. The appellant cleared PPCP to vendors for conversion to battery components, reversing CENVAT credit on invoices. The department issued a show cause notice demanding payment, contending the activity amounted to trading. The adjudicating authority confirmed the demand, and penalties were imposed. The first appellate authority upheld the demand for reversing the amount attributable to PPCP clearances under Rule 6(3A) of CENVAT Credit Rules, 2004, remanding the matter. However, the appellate authority misdirected findings, as the appellant's contention that PPCP was inputs, supported by a previous order, was accepted by the Revenue. The Tribunal's ratio favored the appellant, stating that if inputs were cleared as such, no reversal of CENVAT credit was required. The Tribunal held the impugned order unsustainable and allowed the appeal.

In conclusion, the Tribunal found in favor of the appellant, holding that the demand for payment equivalent to 6% of the value of cleared goods was unsustainable. The appellant's contention that PPCP was inputs and no reversal of CENVAT credit was required for clearing inputs as such was upheld. The Tribunal set aside the impugned order and allowed the appeal.