2023 (12) TMI 779 - AT - Central Excise

Recovery of CENVAT Credit alongwith interest and penalty - pro-rata adjustment, undertaken by the appellant, is in conformity with rule 6 of CENVAT Credit Rules, 2004 or not - adjustment for reversal done on annual basis - conformity with the prescription in rule 6(3) of CENVAT Credit Rules, 2004 pertaining to consequence of non-maintenance of separate records. HELD THAT - The Tribunal, in M/S STAR AGRIWAREHOUSING COLLATERAL MANAGEMENT LTD. VERSUS COMMISSIONER, CENTRAL EXCISE SERVICE TAX, JAIPUR (RAJASTHAN). 2020 (10) TMI 198 - CESTAT NEW DELHI has held that The procedure prescribed in Rule 6(3A) of the Cenvat Credit Rules is only to make the provisions of Rule 3 workable. By means of proportionate reversal the requirement of Rule 6(3) has been substantially satisfied. This is also provided in Rule 6(3D) of the Cenvat Credit Rules which was introduced at a later date. Thus, the provisions of rule 6, offering alternatives, are subject to preference on the prioritization of options. The claim of the appellant that they had apportioned input services between excisable goods and exempted service and followed up with reversal of credit to the extent attributable to the latter does not appear to have been examined in the order of the adjudicating authority. The impugned order set aside - matter remanded back to the original authority for a fresh decision after taking note of the submissions of appellant herein - appeal allowed by way of remand.

Summary

Issues Involved:
The issues involved in the judgment are the confirmation of demand under rule 14 of CENVAT Credit Rules, 2004, imposition of penalty under rule 15 of CENVAT Credit Rules, 2004, and the dispute regarding credit availed on 'input service' attributable to manufacturing and trading activities.

Summary of the Judgment:

1. The appeal by M/s Atlas Copco (India) Ltd was against the order of the Commissioner of Central Excise, Pune - I confirming a demand under rule 14 of CENVAT Credit Rules, 2004, and imposing a penalty under rule 15, while dropping another demand. The primary objection was regarding the pro-rata adjustment not conforming to rule 6 of the said rules. The appellant argued that the discretion for exercising options rested with the assessee, citing relevant tribunal and court decisions.

2. The central issue was the appellant's compliance with rule 6(3) of CENVAT Credit Rules, 2004 concerning the consequence of not maintaining separate records for common 'input services'. The appellant contended that they followed rule 6(2) by segregating the utilization of common input services between excisable goods and exempted services. The Tribunal's decision in Star Agriwarehousing & Collateral Management Ltd case supported the appellant's position.

3. The Tribunal emphasized that once the proportionate reversal of CENVAT credit is made under Rule 6(3A), any procedural violations are inconsequential and should not disentitle the assessee from availing the credit. The Tribunal referred to various decisions supporting the view that proportionate reversal satisfies the non-availment requirement.

4. The judgment also discussed the interpretation of exemption clauses and the need for liberal construction in case of ambiguity. It cited relevant court decisions to support the appellant's position regarding the utilization of CENVAT credit for common input services.

5. Ultimately, the Tribunal set aside the impugned order and remanded the matter back to the original authority for a fresh decision, considering the appellant's submissions. The appeal was disposed of accordingly.

( Order pronounced in the open court on 13/12/2023 )