2021 (11) TMI 829 - AT - Central Excise

CENVAT Credit - common input - Furnace Oil - liability to pay 10% of the value of the exempted goods in terms of Rule 6(3) of CCR - appellant had suo moto reversed the proportionate credit before issuance of show-cause notice - HELD THAT - There is no dispute to the fact that the appellant suo moto reversed the proportionate CENVAT Credit in respect of furnace oil before issuance of show-cause notice and also paid the interest @ 13%. However, subsequently the appellant also paid the remaining 11% interest in terms of Section 73 of the Finance Act, 2010. We find that even without considering the Finance Act, 2010 for the prior period and even subsequent to the validity of this retrospective amendment provision this issue was considered. In catena of judgments, various Courts and Tribunal has consistently held that if the assessee reversed the proportionate credit even though belatedly and paid the interest for delay in reversal, the demand of 5%/10% in terms of Rule 6(3) will not sustain. Therefore, since the appellant admittedly reversed the proportionate credit in respect of furnace oil used in or in relation to manufacture of exempted goods and also paid the interest @ 24%, the demand of 10% of the value of exempted goods will not sustain. Once the proportionate credit in respect of the inputs used in the manufacture of exempted goods has been reversed and interest thereupon was paid in case of any delay in reversal, the demand of 10% of the value of exempted goods under Rule 6(3) will not sustain - since the appellants have reversed the proportionate credit along with payment of 24% interest, the demand of 10% of value of the exempted goods in terms of Rule 6(3) is not sustainable - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Liability of the appellant to pay 10% of the value of exempted goods under Rule 6(3) of the CENVAT Credit Rules.
2. Validity of the appellant's reversal of proportionate CENVAT Credit and payment of interest.
3. Applicability of retrospective amendment under Section 73 of the Finance Act, 2010.
4. Impact of judicial precedents on the appellant's case.

Issue-wise Detailed Analysis:

1. Liability to Pay 10% of the Value of Exempted Goods:
The primary issue was whether the appellant was required to pay 10% of the value of exempted goods under Rule 6(3) of the CENVAT Credit Rules for the period from May 2005 to September 2007. The appellant had utilized common inputs, specifically Furnace Oil, for both dutiable and exempted goods. The tribunal found that the appellant had reversed the proportionate CENVAT Credit and paid interest before the issuance of the show-cause notice, which negated the requirement to pay 10% of the value of exempted goods.

2. Validity of Reversal of Proportionate CENVAT Credit and Payment of Interest:
The appellant reversed the proportionate CENVAT Credit and paid 13% interest before the show-cause notice was issued. Subsequently, the appellant paid the remaining 11% interest as mandated by the retrospective amendment under Section 73 of the Finance Act, 2010. The tribunal noted that the reversal of the proportionate credit and the payment of interest, even if done belatedly, were sufficient to meet the requirements, and thus, the demand for 10% of the value of exempted goods was not sustainable.

3. Applicability of Retrospective Amendment:
The Revenue argued that the appellant should have paid the proportionate CENVAT Credit along with 24% interest within six months of the enactment of the retrospective amendment under Section 73 of the Finance Act, 2010. However, the tribunal found that the appellant had complied with the reversal of credit and payment of interest, albeit after the prescribed period. The tribunal held that the appellant's actions were consistent with the requirements of the retrospective amendment, thus negating the demand for 10% of the value of exempted goods.

4. Impact of Judicial Precedents:
The appellant cited several judicial precedents to support their case, including decisions from CESTAT, Ahmedabad, and various High Courts. The tribunal reviewed these precedents and found that they consistently held that if the assessee reversed the proportionate credit and paid the interest for any delay, the demand for 10% of the value of exempted goods under Rule 6(3) would not be sustained. The tribunal cited cases such as Unimed Technologies Ltd., Tata Chemicals Ltd., and Goyal Proteins Ltd., which supported the appellant's position. The tribunal concluded that the appellant's reversal of proportionate credit and payment of interest were in line with these judicial precedents, thus invalidating the demand for 10% of the value of exempted goods.

Conclusion:
The tribunal set aside the impugned order and allowed the appeal, concluding that the appellant's reversal of proportionate CENVAT Credit and payment of interest fulfilled the requirements under the CENVAT Credit Rules and the retrospective amendment. The demand for 10% of the value of exempted goods was deemed unsustainable, and the appeal was allowed with consequential relief.

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