2024 (9) TMI 402 - AT - Central Excise

CENVAT Credit - interpretation of statute - Rule 6 of CCR - appellant did not maintain separate accounts for Cenvat credit - demand equal to 6% of difference between the sale price and purchase price of the goods traded during the period January 2016 to February 2017 in terms of Rule 6 of Cenvat Credit Rules - interest on delayed reversal of proportionate credit under Rule 14 of CCR - HELD THAT - The appellant have reversed the proportionate credit attributed to common input service i.e. trading activity therefore, in view of the various judgments relied upon by the appellant, it is settled law that once the proportionate credit attributed to common input services has been reversed, no demand at the rate of 6% of the difference between the purchase price and sale price is sustainable. As regards the correctness of the reversal of credit, the Revenue can verify the same. Since the appellant have reversed the credit belatedly, it is their submission that during the relevant time they have not utilised the Cenvat credit and maintained the balance more than the amount to be reversed therefore, interest is not payable in terms of Rule 14 prevalent at the relevant time. Interest on delayed reversal of proportionate credit under Rule 14 - HELD THAT - As per the Rule 14 it is clear that interest is payable not merely on availment of Cenvat credit but also on utilisation thereof. In the present case, though the appellant have taken Cenvat credit but not utilised the same as they have maintained sufficient balance in Cenvat account which was more than the amount of reversal therefore, in view of the provisions of Rule 14, prevalent at the relevant time, the appellant is not liable to pay any interest. The demand under Rule 6 is not sustainable. Accordingly the impugned order is set-aside - Appeal allowed.

Summary

Issues:
Interpretation of Rule 6 of Cenvat Credit Rules regarding demand on difference between sale and purchase price due to lack of separate accounts for Cenvat credit. Applicability of interest on delayed reversal of proportionate credit under Rule 14.

Analysis:
The case involved a dispute regarding the demand equal to 6% of the difference between the sale price and purchase price of goods traded, as per Rule 6 of Cenvat Credit Rules, due to the appellant's failure to maintain separate accounts for Cenvat credit. The appellant argued that they had reversed the proportionate Cenvat credit attributed to common input services used in trading activities, thus negating the need to pay the 6% demand. They also contended that interest was not payable as they had maintained an unutilized credit balance exceeding the amount of reversal during the relevant period. The appellant cited various judgments in support of their arguments.

The Revenue, represented by the Superintendent (AR), supported the findings of the impugned order upholding the demand and interest.

Upon considering the submissions and records, the Tribunal found that the appellant had indeed reversed the proportionate credit linked to common input services, as per the judgments cited. It was established that once such credit had been reversed, the 6% demand was not sustainable. The Tribunal noted that the Revenue could verify the correctness of the credit reversal. Regarding interest, the Tribunal referred to Rule 14, which stipulates the recovery of wrongly taken or erroneously refunded Cenvat credit. The Tribunal emphasized that interest is payable not only on availing Cenvat credit but also on its utilization. In this case, since the appellant had taken but not utilized the credit due to maintaining a balance exceeding the reversal amount, they were deemed not liable to pay any interest, in accordance with Rule 14.

Based on the observations and findings, the Tribunal concluded that the demand under Rule 6 was unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed.