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2019 (4) TMI 14 - AT - Central ExciseCENVAT Credit - common input and input services for both taxable and exempted goods - non-maintenance of separate records - Rule 6(3)(i) of the CENVAT Credit Rules, 2004 - Held that - The appellants have in fact maintained the separate records in respect of inputs used for dutiable and exempted goods and in case of common input services, the appellant did not maintain separate records. Further, the appellant has stated that they were having sufficient balance in their CENVAT credit account and they have not utilized the credit availed. Further, after the introduction of GST they have allegedly reversed the credit more than the proportionate credit required to be reversed. Demand of interest - Held that - Once they have the sufficient balance in their CENVAT credit account and they have reversed the proportionate credit before its utilization, then they are not liable to pay interest in view of the decision of Karnataka High Court in the case of CCE vs. Bill Forge Pvt. Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT . Appellants have filed the documents alleging that they have reversed proportionate credit and had sufficient closing balance in their CENVAT account but this fact needs to be verified by the original authority - Appeal allowed by way of remand.
Issues:
1. Availing CENVAT credit on common inputs for manufacturing both taxable and exempted goods. 2. Failure to pay 6% of the value of exempted goods under Rule 6(3)(i) of CENVAT Credit Rules, 2004. 3. Reversal of proportionate credit under Rule 6(3A) of the CENVAT Credit Rules. 4. Question of payment of interest and penalty. Analysis: Issue 1: Availing CENVAT credit on common inputs The appellant, engaged in manufacturing Water Filtration Equipment and Reverse Osmosis Systems, availed CENVAT credit on inputs for both taxable and exempted goods. The appellant claimed exemption under Notification No.12/2012 for Reverse Osmosis Systems. The original authority confirmed a demand for non-payment of 6% of the value of exempted goods due to availing common input credit without maintaining separate inventory. Issue 2: Failure to pay 6% of the value of exempted goods The appellant contested that they maintained separate accounts for inputs used in dutiable and exempted goods but not for common input services. The appellant argued that they had sufficient CENVAT credit balance, which was not utilized, and a portion was reversed. The appellant claimed compliance with Rule 6 of CENVAT Credit Rules, 2004, post-GST introduction, by reversing proportionate credit. Issue 3: Reversal of proportionate credit The Tribunal found that the appellant had maintained separate records for inputs but not for common input services. The appellant claimed to have reversed more credit than required post-GST. Citing judicial precedents, the Tribunal held that reversal of proportionate credit is sufficient compliance with Rule 6(3A) of the CENVAT Credit Rules. The matter was remanded to the original authority for verification. Issue 4: Question of payment of interest and penalty The Tribunal observed that if the appellant had a sufficient CENVAT credit balance and reversed proportionate credit before utilization, they are not liable to pay interest. Citing a Karnataka High Court decision, the Tribunal allowed the appeal by remanding the matter to verify if the appellant had reversed proportionate credit as per Rule 6(3A) of the CENVAT Credit Rules. The original authority was directed to pass an order after affording a reasonable opportunity to the appellant.
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