2019 (2) TMI 1293 - AT - Central Excise

CENVAT Credit - common inputs used in taxable as well as exempt activity - non-maintenance of separate records - Rule 6 of the CENVAT Credit Rules, 2004 - Held that - The appellant has already reversed the proportionate CENVAT credit in terms of Rule 6(3)(ii) read with Rule 6(3A) and therefore, he is not required to pay 5% / 6% of the value of the exempted service as demanded by the Commissioner (A) - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of appeal by Commissioner (A) regarding demand of 6% of value of exempted goods under Rule 6 of CENVAT Credit Rules, 2004.

Analysis:
1. The appeal was filed against the order passed by the Commissioner (A) rejecting the appellant's appeal regarding the demand of an amount equal to 6% of the value of exempted goods manufactured during a specific period. The appellant, engaged in manufacturing Liquid / Gaseous Nitrogen, Oxygen Argon, was found to have not maintained separate records of inputs for dutiable and exempted goods, as required by Rule 6(2) of the CENVAT Credit Rules, 2004. A show-cause notice was issued demanding the amount, which was confirmed by the Asst. Commissioner in the Order-in-Original. The appellant argued that they had already reversed the proportionate credit as per Rule 6(3)(ii) and Rule 6(3A), and the demand was erroneous. The appellant relied on various judicial precedents to support their case.

2. The appellant contended that the impugned order was not sustainable as it contradicted binding judicial precedents and that they had complied with the provisions by reversing the proportionate credit. The appellant argued that the demand for 5% / 6% of the value of exempted goods was incorrect, as the law allowed the assessee to choose the method beneficial to them. The appellant cited several decisions of the Tribunal and High Courts to support their argument. On the other hand, the learned Assistant Commissioner argued that the appellant had not exercised the option under Rule 6(3) of the CENVAT Credit Rules, leading to the confirmation of the demand by the lower authorities.

3. Upon reviewing the submissions and evidence, the Judicial Member found that the appellant had already reversed the proportionate CENVAT credit as per the rules and was not obligated to pay the demanded amount of 5% / 6% of the value of exempted goods. The Member noted that the issue had been settled by previous decisions cited by the appellant and concluded that the impugned order was not legally sustainable. Consequently, the Judicial Member allowed the appeal, setting aside the order passed by the Commissioner (A) in favor of the appellant. The operative portion of the order was pronounced in open court on 15/02/2019.