2024 (2) TMI 957 - AT - Central Excise

CENVAT Credit - manufacturer of dutiable goods and conditionally/partially exempted goods - failure to properly bifurcate the input services, they have taken the Cenvat Credit towards the entire input services received - reversal of proportionate Cenvat Credit in respect of the input service used in the manufacture of partially exempted goods - demand of differential duty in respect of the partially exempted goods, i.e. normal rate of duty less 1% or 2% Excise Duty already paid by the Appellant - HELD THAT - The issue is squarely covered by the case law of HELLO MINERALS WATER (P) LTD. VERSUS UNION OF INDIA 2004 (7) TMI 98 - ALLAHABAD HIGH COURT , wherein it has been held reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence the benefit has to be given of the notification granting exemption/rate of duty on the final product since the reversal of the credit on the input was done at the Tribunal s stage. Prior to this, the Hon ble Supreme Court in the case of CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR 1995 (12) TMI 72 - SUPREME COURT has held we see no reason why the assessee cannot make a debit entry in the credit account before removal of the exempted final product. If this debit entry is permissible to be made, credit entry for the duties paid on the inputs utilised in manufacture of the final exempted product will stand deleted in the accounts of the assessee. In such a situation, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final exempted product under Rule 57A. Thus, the demand on the above is set aside. Cenvat Credit taken towards GTA Services backed up by proper documents - HELD THAT - Matter remanded to the Adjudicating Authority. The Appellant is directed to submit all the documentary evidence. The Adjudicating Authority should follow the principle of natural justice and decide the issue within four months from the date of communication of this order - All the penalties on the Appellants and on the co-noticee, Mr. Satish Agarwal are set aside - Appellant is required to pay the confirmed demand, if any, on account of Cenvat taken on GTA Services, along with interest. However, the penalty on the same is set aside - appeal allowed in part and part matter on remand.

Summary

Issues:
The judgment involves issues related to the eligibility of Cenvat Credit for partially exempted goods and the correctness of Cenvat Credit taken on GTA Services.

Eligibility of Cenvat Credit for Partially Exempted Goods:
The Appellant, a manufacturer of dutiable and partially exempted goods, maintained separate records for input receipt and Cenvat Credit utilization. They claimed Cenvat Credit only for dutiable goods and reversed the proportionate credit for partially exempted goods. The Department issued a Show Cause Notice for demanding differential duty on the partially exempted goods. The Appellant relied on legal precedents like Hello Mineral Water (P) Ltd. Vs. UOI-2004 and Chandrapur Magnet Wires (P) Ltd. Vs. Collector of C. Excise, Nagpur-1996 to support their position. The Tribunal, citing the case law of Hello Mineral Water (P) Ltd., held that reversal of Cenvat Credit amounts to non-availment of credit, thus granting benefit of exemption/rate of duty on the final product due to the reversal of credit at the Tribunal's stage. Consequently, the demand of Rs. 58,91,501/- was set aside.

Correctness of Cenvat Credit on GTA Services:
Another demand of Rs. 3,01,070/- was raised on the Cenvat Credit taken by the Appellant for GTA Services based on invoices not conforming to Rule 9 of CCR, 2004. The Appellant argued that the credit was taken based on ISD Challans issued by their Central Corporate office, which had ISD Registration. The Tribunal remanded this issue to the Adjudicating Authority for further examination with proper documentary evidence. The Adjudicating Authority was directed to decide the matter within four months, following the principles of natural justice.

Conclusion:
The Tribunal allowed the appeal on the eligibility of Cenvat Credit for partially exempted goods based on legal precedents and set aside the demands. The matter regarding the correctness of Cenvat Credit on GTA Services was remanded for further review. Penalties on the Appellants and co-noticee were set aside, while the confirmed demand, if any, on account of Cenvat taken on GTA Services was to be paid along with interest, with the penalty being set aside.