2018 (10) TMI 827 - AT - Central Excise

CENVAT Credit - common inputs/input services, used for manufacture of exempted products and dutiable products - non-maintenance of separate records - credit on certain inputs services also denied - vehicles as well as insurance for money- in-transit. Held that - It is indeed correct to say that the show-cause notice is silent as to what are the inputs and input services on which the appellants have availed credit for production of Bagasse, Press Mud and Electricity. It is vaguely stated that the appellants have availed credit on inputs and input services for production of Bagasse, Press Mud and Electricity. In the annexure to the show-cause notice also, there is no specific figure shown regarding credit availed separately on inputs and input services. The demand prior to 01.03.2015 has been dropped by the adjudicating authority observing that the requirement to maintain separate accounts would be applicable only to exempted goods prior to such date. That an amendment was brought forth with effect from 01.03.2015, wherein even if there is production of non-excisable goods, the assessee is required to maintain separate accounts - Therefore, after 01.03.2015, the adjudicating authority has confirmed the demand. It is found that since there is no credit availed on inputs or input services for products of Bagasse, Press Mud or Electricity even after 01.03.2015, the demand cannot sustain. Credit disallowed on input services relating to insurance on motor vehicles as well as insurance for transit-in-money - Held that - The period involved being prior to 04.04.2011 - the credit is eligible as these services fall within the category of activities relating to business of manufacture. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegation of wrongly availed credit due to lack of separate accounts for common inputs.
2. Confirmation of demand for certain products post 01.03.2015.
3. Ineligibility of credit on specific services.
4. Appeal against dropped demands.
5. Requirement to maintain separate accounts under Cenvat Credit Rules, 2004.
6. Credit availed on input services.
7. Adjudication of demands by appellate authority.

Analysis:

1. The appellants faced show-cause notices for wrongly availed credit without maintaining separate accounts for common inputs used in the production of exempted and dutiable products. The original authority dropped the demand pre-01.03.2015 but confirmed it post that date for specific products like Bagasse, Press Mud, and Electricity. However, proceedings regarding wrongly availed credit on capital goods were halted.

2. The Commissioner (Appeals) upheld the demand, leading to appeals by the appellants. The counsel highlighted that demands for certain periods were mistakenly included in the appeals and requested their dismissal. The major demand was due to the alleged failure to maintain separate accounts as required under Rule 6(2) of Cenvat Credit Rules, 2004, for manufacturing exempted and dutiable products. The appellants clarified they did not avail credit for inputs related to Bagasse, Press Mud, and Electricity production.

3. The counsel referenced judgments where the Tribunal set aside demands for not maintaining separate accounts in similar cases. The issue of credit availed on input services amounting to ?2,794 was also contested, with the period predating 01.04.2011 being deemed eligible for credit.

4. The Tribunal observed discrepancies in the show-cause notice regarding the inputs and services for which credit was availed by the appellants. Citing precedents, the Tribunal emphasized the necessity for the department to establish credit availed on specific inputs used in production. The demand post-01.03.2015 was refuted due to the absence of credit availed for the mentioned products.

5. The Tribunal further dismissed the demand for credit on input services related to insurance, considering them eligible activities for the business of manufacture. Ultimately, the Tribunal concluded that the appellants did not avail credit for inputs or services up to the production stages of Bagasse, Press Mud, and Electricity, leading to the demand being unsustainable.

6. Consequently, the impugned orders were set aside, and certain appeals were allowed with potential reliefs. Appeals E/41378, 41381, and 41382/2018 were allowed, while E/41379 and E/41380/2018 were dismissed as withdrawn.

This detailed analysis covers the various issues addressed in the legal judgment, providing a comprehensive overview of the case and its implications.