2023 (9) TMI 1136 - AT - Central Excise

Reversal of CENVAT Credit - formula applied by the appellant for reversing the proportionate credit availed on common input services used in production of the exempted product (electricity) is correct or not - Department is of the view that the amount to be reversed has to be calculated by taking the entire credit (total credit) availed by the appellant - HELD THAT - The very same issue was analysed by the Tribunal in the case of M/S. TOSHIBA JSW POWER SYSTEMS PRIVATE LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI 2023 (6) TMI 543 - CESTAT CHENNAI where it was held that Total Cenvat Credit for the purpose of formula under Rule 6(3A) is only total Cenvat credit of common input service and will not include the Cenvat credit on input/input service exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, then the Cenvat credit of part of input service even though used in the manufacture of dutiable goods, shall stand disallowed, which is not provided under any of the Rule of Cenvat Credit Rules, 2004. Similar view was taken by the Tribunal in the case of AAVANTIKA GAS LTD VERSUS COMMISSIONER, CGST- INDORE 2023 (1) TMI 505 - CESTAT NEW DELHI . After appreciating the facts and following the decisions as above, we are of the considered view that the proportionate credit reversed by the appellant originally is correct and therefore the amount reversed as per direction of the audit team on 20.7.2013 is excess reversal made by the appellant. The appellant is therefore eligible for recredit of the amount of Rs.65,24, 669/-. There is no request to pay interest from the date of reversal in the reply to Show Cause Notice. The adjudication has also considered the issue of reversal of credit as per direction of audit team - it is not necessary to consider the eligibility of interest in this appeal. The appellant is eligible to avail re-credit / refund. The impugned order is set aside - appeal allowed.

Summary

Issues involved:
The primary issue in this case is whether the appellant correctly applied the formula under Rule 6 (3 A) of CENVAT Credit Rules 2004 for reversing the proportionate credit availed on common input services used in the production of exempted product (electricity). Another issue is whether the appellant is eligible for recredit of the excess amount reversed and interest on said amount.

Issue 1: Correct application of formula under Rule 6 (3 A) of CENVAT Credit Rules 2004:
The appellant, engaged in manufacturing clinker and cement, produced electricity for captive consumption and sold part to Tamil Nadu Electricity Board. An audit objection was raised regarding the reversal of credit on common inputs used for electricity production sold to the Board. The department contended that the appellant should have considered total credit instead of total common input credit while applying the formula. The appellant reversed credit under protest and later sought recredit, arguing that the reversal was in excess. The original authority and Commissioner (Appeals) upheld the denial of recredit, leading to the appeal.

Issue 2: Eligibility for recredit and interest:
The appellant argued that they correctly applied the formula as per law and should be allowed recredit of the excess reversed amount. They also claimed eligibility for interest on the reversed amount made under protest. The appellant cited precedents such as the decision in the case of M/s. Toshiba JSW Power System Pvt. Ltd. and M/s. Aavantika Gas Ltd. to support their position.

Judgment:
The Tribunal analyzed the interpretation of the term "total cenvat credit" in the formula under Rule 6 (3 A) in previous cases. Referring to the decision in the case of CCE Vs Reliance Industries Ltd., the Tribunal held that total cenvat credit for the formula is only on common input services and does not include credit on inputs exclusively used for dutiable goods. The Tribunal found that the appellant's original reversal of credit was correct, and the subsequent reversal under audit direction was an excess. Therefore, the appellant was deemed eligible for recredit of the excess amount.

The Tribunal also addressed the appellant's claim for interest on the reversed amount. While acknowledging the appellant's argument and citing relevant legal provisions, the Tribunal found that the issue of interest was not necessary to consider in this appeal. Ultimately, the impugned order was set aside, allowing the appeal with any consequential reliefs.