2019 (1) TMI 314 - AT - Central Excise

CENVAT Credit - inputs used in both dutiable as well as exempted goods - non-maintenance of separate records - Rule 6 of the credit Rules - Held that - The cenvat credit for an amount much more than what has been confirmed by the original adjudicating authority has already been reversed - Hon ble Apex Court in the case of Chandrapur Magnet Wires Pvt. Ltd. vs. CCE, Nagpur 1995 (12) TMI 72 - SUPREME COURT OF INDIA has held that once cenvat credit is reversed, it is to be considered ab initio not availed, the appellant herein in compliance of Rule 6 (a) as had also intimated about exercising the option of availing the amended provisions contained in Cenvat Credit Rules 2002 and Cenvat Credit Rules 2004 for the period April 2004 to 31st March, 2008 vide their letter dated 2nd November, 2011. Demand in respect of financial year 2008.09 for an amount of ₹ 8,85,719/- - Held that - It is observed that the same is based on 10% of sale-price of exempted goods and that the Department has not computed the quantum of credit actually attributable to the exempted goods, as is otherwise been clarified in the CA certificated and also is apparent from the verification report. Thus, the demand for this period is also held to not to be sustainable. Violation of rule 6 of Cenvat Credit Rules, 2004 - interpretation of statute - Held that - The appellant is entitled to exercise the option as provided under Rule 6(3) in absence of maintaining the proper records. The word used in the provision is option , which clarifies that it is the appellant who has liberty to decide which option to be exercised and Revenue cannot insist the appellant to avail a particular option - Where the assessee has categorically by way of intimation opted for option provided under 6(3)(ii), CCR then the Revenue cannot insist the assessee to opt for Rule 6(3)(i) - the Adjudicating Authority has failed to interpret Rule 6(3) CCR properly while confirming the impugned demand. Thus, it is clear that the demand at 10% /8% as proposed and confirmed is the forced demand denying the option as is granted by the legislation to the assessee. Time Limitation - Held that - The records of appellant had regularly been reviewed and were reviewed even in the year 2006 as well. But the department did not raise any dispute at that time. Also the things were absolutely in their notice after the letter of the appellant dated 02.11.2010 intimating about their option - SCN is barred by limitation of time. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 6 of Cenvat Credit Rules, 2004 regarding maintaining separate records for input used in exempted and dutiable goods.
2. Consideration of Chartered Accountant Certificate in determining cenvat credit reversal.
3. Justification of the order by the Department based on verification report and CA Certificate.
4. Calculation of cenvat credit reversal and demand for different financial years.
5. Compliance with Rule 6(3) of CCR and the appellant's right to choose the option.
6. Plea of limitation regarding the invocation of Section 70(3) of the Finance Act, 1944.

Analysis:

1. The appeal involves the interpretation of Rule 6 of Cenvat Credit Rules, 2004, where the appellant was found not maintaining separate records for inputs used in exempted and dutiable goods, leading to a demand for recovery. The appellant argued that they either do not avail credit on inputs for exempted goods or reverse it, citing case laws to support their position.

2. The consideration of the Chartered Accountant Certificate is crucial in determining the cenvat credit reversal. The appellant claimed that the adjudicating authority did not fully consider the CA Certificate, highlighting the variance in the amount reversed by the appellant compared to the demand confirmed by the order under challenge.

3. The Department justified the order based on the verification report and CA Certificate, asserting that the demand for cenvat credit and penalties were rightly confirmed. They argued that the verification report and CA Certificate were duly considered, leading to the order under challenge.

4. The calculation of cenvat credit reversal and demand for different financial years was detailed in the records, showing discrepancies between the amounts demanded in the show cause notice and those reversed by the appellant, as per the CA Certificate and verification report.

5. Regarding compliance with Rule 6(3) of CCR and the appellant's right to choose the option, the Tribunal observed that the appellant had reversed cenvat credit as required, intimating their option under the rules. The Tribunal emphasized the appellant's liberty to decide on the option, citing relevant case laws to support their decision.

6. Lastly, the plea of limitation was considered concerning the invocation of Section 70(3) of the Finance Act, 1944. The Tribunal noted that the appellant's records had been reviewed earlier, and there was no suppression of facts, leading to the show cause notice being held as barred by time. Consequently, the order under challenge was set aside, and the appeal was allowed.