2024 (7) TMI 299 - AT - Central Excise

Reversal of CENVAT Credit - common credits on inputs and input services availed on taxable as well as exempt goods - Rule 6(3A)(a) of the CCR - HELD THAT - It is a fact on record that the appellant is neither taking CENVAT credit attributable to exempted goods or have reversed proportionate standard credit attributable to exempted goods. The said fact has been examined during the course of audit. Moreover, the appellant has periodically intimated to the Department to that effect. The impugned proceedings are not sustainable against the appellant. In view of this, there are no merit in the impugned orders which have been passed in gross violation of judicial pronouncements. Therefore, as appellant has not taken CENVAT Credit of input services which have been used for manufacturing of the final exempted goods, therefore, appellant are not required to pay an amount equivalent to 5/6/7% of the value of exempted goods. As no demand is sustainable against the appellant, no penalty can be imposed on the appellant. The impugned order set aside - appeal allowed.

Summary

Issues:
Common issue of CENVAT credit reversal under Rule 6 of the CENVAT Credit Rules.

Analysis:
The appellant, engaged in the manufacture and supply of biscuits, availed CENVAT credit based on the actual consumption of inputs for exempted goods. The appellant filed required intimations and maintained records of credit availed on common inputs and input services. The Department initiated an investigation regarding the reversal of credits under Rule 6 of the CENVAT Credit Rules. The appellant had shown credit availed and reversals made in returns, but disputes arose regarding the proper reversal of credits. The Department proposed a demand under Rule 6(3)(i) of the CCR based on audit findings and Show Cause Notices.

The appellant responded to the Show Cause Notices, contending that they had not availed CENVAT credit or had reversed proportionate credit for exempted goods used in manufacturing. The appellant argued that the demand was unsustainable, citing a relevant High Court decision. The appellant also raised issues regarding the validity of impugned orders, the disproportionate demand, the invocability of the extended limitation period, and the imposition of interest and penalty.

The Tribunal found that the appellant had neither taken CENVAT credit for exempted goods nor reversed proportionate credit, as evidenced by periodic intimation to the Department. Considering this, the Tribunal held that the impugned proceedings were unsustainable and set aside the orders. Consequently, no demand or penalty was sustainable against the appellant. The appeals were allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that no CENVAT credit was taken for input services used in manufacturing exempted goods, leading to the dismissal of the demand and penalty. The decision highlighted the importance of compliance with CENVAT credit rules and the need for proper documentation and intimation to authorities for credit availed and reversals made.