2023 (9) TMI 867 - AT - Central Excise

Reversal of CENVAT Credit - appellant engaged in activity of trading of coal - in the guise of removal of inputs as such, the appellant was engaged in rendering of services namely, Trading of Goods , which service was exempt as per the explanation to Rule 2(e) of the Cenvat credit Rules, 2004 - non-maintenance of separate records for taxable and exempt services - HELD THAT - The case law relied upon by the appellant are not relevant to the facts of this case as in those cases, the case of the revenue was that the appellant is clearing input as such, therefore the issue arose whether in that circumstances, the appellant was required to reverse proportionate cenvat credit on input services or not, whereas in the case in hand, the case of the revenue is that the appellant is providing exempted service namely trading activity, in that circumstances, whether the appellant is required to reverse proportionate cenvat credit with regard to input and input services used in providing final exempted service or not? Therefore, the case law relied upon by the appellant are distinguishable from the facts and circumstances of the case, as the appellant has already revered proportionate cenvat credit for providing the exempted service namely trading activity. In that circumstances, proportionate reversal of cenvat credit on inputs cleared as such and proportionate cenvat credit attributable to exmepted service has already been reversed by the appellant the same is sufficient to meet the ends of justice. The appellant is required to reverse proportionate cenvat credit on inputs cleared as such and proportionate input services used for providing trading activities i.e. trading of coal, therefore, there is no requirement of payment of 6%/10% of the value of trading activity provided by the appellant - the demand on account of non-maintenance of separate account for input or input services for final exempted service does not arise and the reversal of cenvat credit on input and proportionate credit on input service is sufficient to meet the ends of justice. Appeal disposed off.

Summary

Issues:
The case involves the appellant availing cenvat credit on inputs and input services, removal of inputs to sister units, trading of goods, and the requirement to reverse cenvat credit.

Details of Judgment:

Issue 1: Availing of cenvat credit on inputs and input services
- The appellant availed cenvat credit on inputs and input services used in manufacturing their final products.
- Inputs like coal, pig iron were used in or in relation to the manufacture of final products.
- The appellant removed some quantities of inputs to sister units and sold unwanted inputs.
- Allegation was made that the appellant engaged in 'Trading of Goods' under exempted service.
- Show cause notice was issued for non-maintenance of separate accounts for taxable and exempted trading services.

Issue 2: Reversal of cenvat credit
- The appellant contended that they reversed proportionate cenvat credit on input services and duty was paid on dutiable goods.
- Cited decisions of Punjab & Haryana High Court to support their contention.
- Department argued that the appellant was engaged in trading of coal, declared as an exempted service.
- The appellant was required to reverse cenvat credit on input services used for providing exempted service.

Judgment:
- The Tribunal found that the appellant was engaged in trading of coal as an exempted service.
- The appellant was required to reverse proportionate cenvat credit on inputs cleared as such and input services used for trading activities.
- The case laws cited by the appellant were deemed irrelevant as they did not apply to the circumstances of this case.
- The appellant's reversal of cenvat credit on inputs and input services for trading activities was considered sufficient.
- The demand for non-maintenance of separate accounts for exempted services was not upheld.
- The appeal was disposed of in favor of the appellant.

Conclusion:
The Tribunal held that the appellant was required to reverse cenvat credit on inputs and input services used for trading activities, and the demand for non-maintenance of separate accounts was not justified.