2019 (2) TMI 1229 - AT - Central Excise

CENVAT Credit - common input services used in the manufacture of excisable goods as well as for trading activity - non-maintenance of separate records - demand of 5%/ 6% of the value of exempted i.e. trading activities - Rule 6(3)(ii) of Cenvat Credit Rules - Held that - The appellant before issuance of show cause notice, reversed the Cenvat credit of ₹ 87,682/-, the proportionate credit as per the statement was ₹ 1,82,426/-, however, as there was dispute on the quantification, after passing the adjudication order the appellant have reversed an additional amount of ₹ 4,55,232/-. Thus, a total amount of ₹ 5,42,914/- was reversed, which was the total credit availed on the common input service. Once proportionate credit is reversed along with interest if any arise due to delay, reversal of the demand under Rule 6(3)(ii) cannot be made - In the present case, though it appears that appellant have reversed the credit however, no evidence was produced regarding payment of interest. Since a part reversal was made after passing the order by original adjudicating authority, the correctness of the reversal was not verified by the Adjudicating Authority. The Adjudicating Authority is directed to reconsider the whole issue particularly, if it is found that the appellant have paid the Cenvat credit of attributed to common input services used in the trading activity and interest on such credit, then the demand would not sustain - appeal allowed by way of remand.

Summary

Issues:
Whether the appellant is required to pay the demand raised under Rule 6(3)(ii) of Cenvat Credit Rules for availing Cenvat credit in respect of common input services used in the manufacture of excisable goods and trading activity.

Analysis:
The appellant availed Cenvat credit on common input services, of which a proportionate credit was reversed before the show cause notice was issued. Subsequently, the appellant reversed the entire Cenvat credit availed on common input services. The appellant argued that once the credit was reversed, no demand under Rule 6(3)(ii) of Cenvat Credit Rules was necessary, citing relevant judgments. The Revenue reiterated the findings of the impugned order. The Tribunal considered the issue of whether the appellant should pay 5% or 6% of the value of exempted trading activities. Various judgments were referenced, including the case of CCE & ST, Udaipur vs. Secure Meters Limited, which supported the appellant's position. The Tribunal directed the Adjudicating Authority to reconsider the issue, specifically examining if the appellant paid the Cenvat credit attributed to common input services used in trading activity and any interest due. The correctness of the reversal was to be verified, and a fresh order was to be passed after considering these aspects. The appellant was to be given a reasonable opportunity for a personal hearing before the new order was issued. The appeal was allowed by remanding it to the Adjudicating Authority for further review.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT AHMEDABAD highlights the arguments presented by both parties, the application of relevant legal provisions, and the Tribunal's decision to remand the case for further examination by the Adjudicating Authority.