2018 (8) TMI 475 - AT - Central Excise

CENVAT Credit - common input services used in the manufacture of dutiable and exempted goods - non-maintenance of separate records - Rule 6 (3) of CENVAT Credit Rules, 2004 - Held that - The adjudicating authority dropped the demand on the basis of verification of the factual position and came to the finding that the separate account are being maintained and no modvat credit is being availed in respect of the input used in the manufacture of final product. Ld. Commissioner (Appeals) reversed the same on his own analysis - It is also a fact that only one incidence of availing CENVAT credit on 30HP motor was relied upon. The appellant admittedly reversed credit on the said motor. No evidence was brought on record that the appellant have availed CENVAT credit in respect of any other inputs used in the manufacture of exempted goods. The demand under Rule 6 can be raised only if it is established that the appellant have availed CENVAT credit in respect of the inputs which have gone into the manufacture of exempted goods. Without establishing this, the demand under rule 6, merely on the basis that the assessee has not maintained the separate account, cannot be confirmed - In the present case it is admitted facts that the appellant have maintained 2 separate accounts one for cenvatable input in RG-23A/C part-I register and for non cenvatable inputs record is maintained in Form-IV register. The closing balance of any of the input was not shown as minus balance therefore, in respect of total 8 dutiable boiler, the quantity of inputs were sufficient in manufacture of such 8 boiler. This shown that no cenvatable input was used in the manufacture of exempted boiler - Moreover, since there is no evidence on record that the appellant have used inputs for manufacture of exempted boiler on which credit was availed, the demand under Rule 6 is not legal and correct. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availing CENVAT credit on common inputs used in manufacturing dutiable and exempted goods.
2. Maintenance of separate accounts for dutiable and exempted goods.
3. Application of Rule 6 of CENVAT Credit Rules, 2004 for demand of 10% of the value of exempted goods.

Analysis:
1. The appellant, engaged in manufacturing Thermic Fluid Heater/Boiler, availed exemption under Notification No. 6/2006-CE for clearing goods as non-conventional energy devices. The department alleged that the appellant availed credit on common inputs used in both dutiable and exempted goods, proposing a demand under Rule 6 (3) of CENVAT Credit Rules, 2004. The adjudicating authority initially dropped the demand, but the Ld. Commissioner (Appeals) upheld it. The appellant maintained separate accounts for cenvatable and non-cenvatable inputs, arguing against the demand based on lack of evidence of availing CENVAT credit for exempted goods.

2. The appellant contended that the demand was solely based on availing credit for one electric motor, which was already reversed. They presented a detailed chart showing no negative balance in inputs used for dutiable goods, indicating no common input usage in exempted goods. The Ld. Commissioner (Appeals) failed to verify the separate account maintenance claimed by the appellant, leading to a lack of evidence supporting the demand under Rule 6.

3. Upon review, the Tribunal found that the original adjudicating authority verified and confirmed the maintenance of separate accounts by the appellant. The Ld. Commissioner (Appeals) did not adequately address this factual finding and relied on a single instance of availing CENVAT credit on a motor, which was subsequently reversed. The Tribunal emphasized that the demand under Rule 6 can only be upheld if it is proven that CENVAT credit was availed for inputs used in exempted goods. Since no such evidence was presented, the demand based on lack of separate account maintenance was deemed invalid.

In conclusion, the Tribunal set aside the Ld. Commissioner (Appeals) order, allowing the appeal in favor of the appellant due to insufficient evidence supporting the demand under Rule 6. The judgment highlighted the necessity of establishing CENVAT credit availed on inputs used in exempted goods before imposing such demands, emphasizing the importance of maintaining separate accounts for dutiable and exempted goods to avoid such disputes.