2023 (4) TMI 430 - HC - Central Excise

CENVAT Credit - common input services - non-maintenance of separate accounts for receipt, consumption and inventory of input and input services meant for use in the manufacture of dutiable and exempted goods or services - whether the respondent has fulfilled his obligation under Rule 6(2) of the Cenvat Credit Rules, 2004 by taking only 85% of the credit on the common input service? - HELD THAT - The learned Tribunal has made an elaborate exercise examining the effect of Rule 6 of the Cenval Credit Rules, post and pre-amendment, such an exercise may not be required in these appeals - Thus, the first question would be whether the assessee had fulfilled its obligation under Rule 6(2) of the Rules by taking only 85% of the credit on the common input services. This being fully factual issue, the order passed by the Tribunal is referred. The Tribunal after noting the provisions of the Rules, took note of the circular issued by the Board in Circular No.868/6/2008-CX dated 9th May, 2008 which gives an opportunity to a manufacturer to furnish a certificate from the cost accountant/chartered accountant giving details of quantity of input used in the manufacture of exempted goods value thereof and Cenvat Credit taken on this inputs to be submitted at the end of the year. It is not in dispute that the assessee had submitted a chartered accountant s certificate dated 15th November, 2010. The Commissioner while examining the said certificate found that the certificate shows the financial year wise/month wise percentage of cenvat credit paid both on input and input services vis- -vis the percentage of duty paid, clearance and non-duty paid clearance covering the period from 2006-07 to 2009-10 which include the duty paid bonded and NRD dispatches - the Commissioner held that non-availing of Cenvat credit upto 15% could be equated as availing of 100% credit on all the common inputs and payment of duty upto 15% of the value of the common inputs which could be attributable to having been used for the manufacture of exempted products. Further, it was held that payment of 15% duty was made within the due date. The question of payment of interest does not arise and hence, it could be concluded that the assessee has complied with the amended provisions of Rule 6 of the Cenvat Credit Rules, 2004 brought about by the Finance Act, 2010. Further, after taking note of the certificates, the Commissioner noted that the percentage of credit not availed or forgone is always more than or equal to the percentage of non-duty paid clearance and in view of the said factual position, opined that there has been sufficient compliance by the assessee as far as maintenance of separate account or for that matter they have followed Rule 6(2) of the said Rules. Taking note of the evidence produced by the assessee, the Tribunal held that the assessee has more than fully met the requirement of Rule 6(2). Further, they found fault with the revenue by pointing out that the revenue has not placed any evidence to show that proportionate amount of Cenvat credit was reversed/not taken by the assessee, was calculated wrongly. Furthermore, the revenue has not produced any alternative calculations to show how much could have been reversed/not taken. Therefore, in the absence of any other evidence, the Tribunal examined the Chartered Accountant s certificate produced by the assessee and held that the assessee had sufficiently met the requirements of maintenance of separate accounts under Rule 6(2) and, therefore, upheld the order passed by the Commissioner who had dropped all the demands raised against the assessee. The Department having issued such communication, it goes without saying that they have now embarked upon an exercise to examine the contents of the Chartered Accountant s certificate. This would indirectly mean that the contest which was made before the Tribunal with regard to the Chartered Accountant s certificate does not any longer survive and it is only the contents thereof, sufficiency or insufficiency of the material contained in the certificate which is now being pursued by the Department. The appeals filed by the revenue are dismissed.

Summary

Issues Involved:
The judgment addresses the delay in filing the appeals and the substantial questions of law raised by the Revenue under Section 35G of the Central Excise Act, 1944. The key issues include the interpretation of the Cenvat Credit Rules, 2004, compliance with Rule 6(2) of the Rules, and the impact of a previous decision on the case.

Interpretation of Cenvat Credit Rules, 2004:
The primary issue in the case was whether the respondent fulfilled their obligation under Rule 6(2) of the Cenvat Credit Rules, 2004 by taking only 85% of the credit on common input services. The Revenue contended that the respondent did not maintain separate accounts for dutiable and exempted goods, leading to alleged contraventions of the Rules. The Commissioner initially dropped the proceedings, stating that the respondent had complied with Rule 6. The Tribunal re-examined the factual position and upheld the Commissioner's decision, noting the sufficiency of evidence provided by the respondent.

Compliance with Rule 6(2) of the Cenvat Credit Rules, 2004:
The Tribunal focused on the compliance requirements for an assessee utilizing common inputs or input services under Rule 6(2) of the Rules. They analyzed a Chartered Accountant's certificate submitted by the assessee, which detailed the percentage of credit taken on inputs and services. The Tribunal found that the assessee had met the Rule's requirements, while faulting the Revenue for not providing evidence to challenge the certificate's accuracy. Ultimately, the Tribunal upheld the Commissioner's decision to drop all demands against the assessee.

Impact of Previous Decision:
The judgment also addressed the impact of a prior decision in the case of Tiara Advertising on the current proceedings. The Tribunal had considered the decision and the Revenue had appealed against it. However, the Court focused on the compliance issue under Rule 6(2) as the primary concern. As the Tribunal had ruled in favor of the assessee on this matter, the Court dismissed the appeals filed by the Revenue, leaving some questions of law open for further consideration.