2024 (1) TMI 389 - AT - Central Excise

CENVAT Credit - taxable as well as exempt goods - availing cenvat credit of central excise duty on inputs going into the manufacture of medicaments which were chargeable to central excise duty and did not avail cenvat credit of central excise duty paid on inputs which were going into the manufacture of medicaments which were exempted - HELD THAT - The appellant had debited entire cenvat credit availed on account of service tax paid on input services, even if a part of the input services were utilized in the manufacture of dutiable final products. It is also noted that central excise duty paid on inputs which were going into the manufacture of exempted final products was not availed by the appellant. This Tribunal in the case of COMMISSIONER OF C. EX. S.T., UDAIPUR VERSUS SECURE METERS LTD. 2016 (6) TMI 1260 - CESTAT NEW DELHI has held that even if subsequent to clearance, the availed cenvat credit is debited, then it is as if the cenvat credit was never availed. The said view of this Tribunal was affirmed by Hon ble Rajasthan High Court in UNION OF INDIA VERSUS SECURE METERS LTD. 2017 (2) TMI 1350 - RAJASTHAN HIGH COURT . Thus, the appellant had not availed cenvat credit at all for the reason that it had debited the entire availed cenvat credit. Therefore, the question of recovery of 5% or 10% of the value of the exempted goods does not arise. The impugned order set aside - As a result, the demand confirmed and penalty imposed on the appellant and penalty imposed on the other appellant are set aside - appeal allowed.

Summary

Issues involved:
The issues involved in this case include the availing of cenvat credit on service tax paid on input services used for both dutiable and exempted final products, the reversal of cenvat credit, and the liability to pay 5% or 10% of the value of exempted final products under Rule 6(3)(i) of Cenvat Credit Rules, 2004.

Summary of Judgment:

Issue 1: Availing of cenvat credit on service tax for both dutiable and exempted final products:
The appellant, engaged in manufacturing medicaments, availed cenvat credit on service tax paid on input services used for both dutiable and exempted final products. However, investigations revealed that the appellant did not maintain separate accounts for services utilized for exempted and dutiable products. The Revenue calculated the amount to be demanded from the appellant under Rule 6(3)(i) of Cenvat Credit Rules, resulting in a demand of around Rs.3.08 crores. The appellant contended that they had reversed the entire cenvat credit availed on service tax paid on input services. The Tribunal noted that the appellant had indeed debited the entire cenvat credit, making it as if the credit was never availed. Citing previous rulings, including one by the Hon'ble Supreme Court, the Tribunal held that the appellant was not liable to pay the demanded amount. The impugned order was set aside, and the demand and penalties were revoked.

Issue 2: Liability to pay 5% or 10% of the value of exempted final products:
The law requires the recovery of 5% or 10% of the value of exempted final products if cenvat credit is availed on services used for both exempted and dutiable goods. However, in this case, the appellant had debited the entire availed cenvat credit, rendering the question of recovery of 5% or 10% irrelevant. Relying on a ruling by the Hon'ble Rajasthan High Court and a previous Tribunal order, the Tribunal set aside the impugned order, revoking the demand and penalties imposed on the appellant.
Separate Judgment:
No separate judgment was delivered by the judges in this case.