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2021 (11) TMI 425 - AT - Central ExciseCENVAT Credit - common input services for taxable as well as exempt goods - non-maintenance of separate records - allegation is that assessee has not opted for claiming credit on proportionate basis by filing the required declaration - non-observance of the procedure as prescribed in Rule 6 of the Credit Rules - HELD THAT - The issue has been settled by the Hon ble Telangana High Court in favour of the assessee in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT wherein it has been held that in case the assessee has not chosen to maintain separate accounts, the Credit Rules do not authorize the departmental authorities to choose one of the options on behalf of the assessee so as to demand the amount of 5% or 10% as per Rule 6(3) of the Credit Rules. The demand of the duty amount calculated @ 5% or 10% of the exempted value cannot be made even though the assessee has not followed the prescribed procedures - there is no legal provision under which an amount equal to 5% or 10% of the value of the exempted goods can be recovered. The reason is that payment of an amount of 5% or 10% is one of the choices under Rule 6 and is not a mandatory payment. This choice cannot be foisted upon the appellant nor can such an amount be recovered under Rule 14. The Show Cause Notice demanding an amount equal to 5% or 10% of the value of the exempted products under Rule 14 is not supported by law. It is not possible to sustain the impugned demand based on such Show Cause Notice and therefore, the appeal filed by the assessee deserves to be allowed. Penalty imposed in the impugned order also needs to be set aside - Appeal allowed - decided in favor of assessee.
Issues:
Appeal against Adjudication Order dated 17.01.2017 - Dispute over availment of CENVAT credit without maintaining separate records for dutiable and exempted goods. Detailed Analysis: Issue 1: Appeal against Adjudication Order The appeals were filed against the Adjudication Order dated 17.01.2017 by both the assessee, M/s. Texmaco Rail & Engg. Ltd., and the Department. The period in dispute ranged from May 2005 to February 2011. Issue 2: Transfer of Proceedings The assessee, a division of Texmaco Ltd., was demerged and transferred to Texmaco Rail & Engineering Limited. The proceedings initiated against "Texmaco Limited" were transferred to "Texmaco Rail & Engineering Limited" accordingly. Issue 3: Dispute Over CENVAT Credit The dispute revolved around the assessee's availment of CENVAT credit without maintaining separate records for dutiable and exempted goods during the period in question. Issue 4: Department's Allegations The Department contended that the assessee failed to opt for claiming credit on a proportionate basis as per Rule 6 of the Credit Rules. The Department argued that the assessee should pay/reverse credit calculated at 5% or 10% of the value of exempted goods. Issue 5: Proceedings and Appeals The Ld. Commissioner concluded the proceedings for the period May 2005 to March 2008 after the assessee applied for reversal of proportionate credit and made the necessary payments. For the period April 2008 to February 2011, the demand was confirmed by the Ld. Commissioner. Issue 6: Legal Arguments The Chartered Accountant for the assessee cited various Tribunal decisions and a CBEC Circular to support the argument that the assessee should not be burdened with duty liability due to procedural irregularities. Issue 7: High Court Decision The Tribunal referred to a decision by the Hon’ble Telangana High Court, holding that the Department cannot demand payment calculated at 5% or 10% of exempted value if the assessee did not maintain separate accounts, as Rule 6 does not authorize such actions. Issue 8: Legal Position The Tribunal found that the demand based on Rule 14 for recovery of an amount equal to 5% or 10% of exempted goods was not supported by law. The demand was deemed unsustainable, and the appeal filed by the assessee was allowed while the Revenue's appeal was rejected. In conclusion, the Tribunal set aside the impugned order, allowed the assessee's appeal with consequential relief, and rejected the Revenue's appeal.
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