2018 (6) TMI 992 - AT - Central Excise

CENVAT Credit - inputs used in the manufacture of exempted final products as well as dutiable final products - non-maintenance of separate records - Rule 6 (3) of Cenvat Credit Rules, 2004 - demand of an amount of 10% equal to the value of exempted goods cleared by the appellants - Whether the provisions of Rule 6(3) of Cenvat Credit Rules, 2004 are invokable or not? - Held that - It is recorded in the show cause notice itself that they have availed proportionate Cenvat credit calculated in the manner which appear is not legal or proper which means that the appellants are maintaining separate records for inputs used in the manufacture of dutiable as well as exempted final goods - As, it is fact on record that the appellants are maintaining separate records for inputs used in the manufacture of dutiable as well as exempted final goods. In that circumstance, the provisions of Rule 6(3) are not invokable in the present cases. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the demand of 10% equal to the value of exempted goods cleared by the appellants is justified under Rule 6(3) of Cenvat Credit Rules, 2004.

Analysis:

Issue 1: Demand of 10% equal to the value of exempted goods
The appellants appealed against the demand of 10% equal to the value of exempted goods cleared by them. The investigation revealed that the appellants were not maintaining separate accounts for the quantities of zinc skimming used in the manufacture of dutiable and exempted goods. The appellants argued that they were segregating zinc skimming into zinc ash and zinc metal, and not availing Cenvat credit on inputs used in the manufacture of exempted goods. They contended that the demand was incorrect as they were maintaining separate records. The AR supported the demand based on Rule 6(3) of Cenvat Credit Rules, emphasizing the necessity of maintaining separate accounts for inputs used in both dutiable and exempted goods.

Analysis Continued:

The Tribunal considered the submissions and found that the main issue was the applicability of Rule 6(3) in this case. The show cause notice indicated that the appellants were maintaining separate records for inputs used in dutiable and exempted goods. As the appellants were indeed maintaining separate records, Rule 6(3) was deemed inapplicable. Therefore, the demand for 10% equal to the value of exempted goods was not sustainable. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief, if any.