2021 (8) TMI 1144 - AT - Central Excise

Reversal of cenvat credit - inputs used for the output goods supplied to BHEL - Job-Work - exemption availed under N/N. 06/2006-CE dated 01.03.2006 - applicability of rule 14 of the cenvat credit rules, 2004 - HELD THAT - Rule 9(1) applies when the appellant took credit for the first time, before reversing the same on the instructions of the Superintendent. When the appellant took suo-moto re-credit, the same amounts to only correction of accounts, to which Rule 9(1) has no application - it is held that Rule 6(6) is squarely applicable in the present case, and therefore the credit was rightly taken by the appellant. On this conclusion, it is held that reversal of credit was not required and hence the demand of cenvat credit, interest and penalty under rule 14 of the cenvat credit rules, 2004 cannot be sustained. The orders passed by the lower authorities regarding demand of cenvat credit, interest and penalty are therefore set-aside. The amount of ₹ 18,86,138/- deposited by the appellant consequent to rejection of stay application by this Tribunal, is directed to be refunded along with interest in accordance with law. The interest is held payable u/s 35FF from the date of deposit to the date of Refund @12% p.a. - appeal allowed.

Summary

Issues Involved:
1. Whether the exemption under Notification No. 06/2006-CE dated 01.03.2006 was rightly availed for goods manufactured for BHEL and used in mega power projects.
2. Whether Rule 14 was rightly invoked by the Revenue for demanding reversal of cenvat credit on inputs used for output goods supplied to BHEL.

Issue-wise Detailed Analysis:

1. Exemption Under Notification No. 06/2006-CE:
The core issue revolves around whether the goods manufactured by the appellant for BHEL, which were used in the Damodar Valley Corporation mega power project, were rightly exempted under Notification No. 06/2006-CE dated 01.03.2006. The appellant entered into rate contracts with BHEL for the fabrication and supply of various iron and steel products. BHEL, acting as an international bidder for the Damodar Valley Corporation project, instructed the appellant to claim cenvat credit and avail the exemption as per the notification.

The appellant initially took cenvat credit on the duty-paid inputs received from BHEL and its vendors. However, upon directions from the Range Superintendent, the appellant reversed the credit. Subsequently, legal advice clarified that since the goods were eligible for exemption under Serial No. 91 of Notification No. 06/2006-CE, Rule 6(1) of the Cenvat Credit Rules, 2004 was not applicable, and thus the reversal was unnecessary. This position was upheld by the Commissioner (Appeals) in an order dated 13.09.2010, which became final as it was not appealed by the Revenue.

2. Invocation of Rule 14 for Reversal of Cenvat Credit:
The Revenue issued a show-cause notice alleging that the appellant was not eligible for the exemption and demanded the reversal of cenvat credit along with interest and penalty. The adjudicating authority initially ruled against the appellant, stating that the benefit of the exemption was only available to the international bidder (BHEL) and not to the appellant as a vendor. This decision was overturned by the Commissioner (Appeals), who confirmed the appellant's eligibility for the exemption.

Despite this, another show-cause notice alleged that the appellant had wrongly taken suo-moto credit after reversing it. The adjudicating authority and Commissioner (Appeals) upheld this view, leading to the appellant's appeal to the Tribunal. The Tribunal remanded the matter back to the adjudicating authority to examine whether the appellant was liable to reverse the cenvat credit and whether the suo-moto credit taken was merely a correction of accounts.

Upon remand, the adjudicating authority rejected the refund claim, holding that the inputs were removed as such, and thus the cenvat credit was rightly reversed. The Commissioner (Appeals) affirmed this view, leading to the present appeal. The Tribunal found that the condition specified in Notification No. 06/2006 and Rule 6(6) of the Cenvat Credit Rules were identical. Since the exemption was upheld by the Commissioner (Appeals) and became final, the appellant was entitled to the cenvat credit, and its reversal was not required.

The Tribunal concluded that the suo-moto credit taken by the appellant was a correction of accounts and did not require a refund application under Section 11B of the Act. The Tribunal set aside the orders demanding cenvat credit, interest, and penalty, and directed the refund of the amount deposited by the appellant, along with interest.

Conclusion:
The Tribunal allowed the appeals, holding that the exemption under Notification No. 06/2006-CE was rightly availed, and the reversal of cenvat credit was not required. The demand for cenvat credit, interest, and penalty was set aside, and the refund of the deposited amount was ordered with interest.