Appellate authority overturns Cenvat credit reversal, High Court declines jurisdiction.

The appellate authority upheld the reversal of Cenvat credit for inputs used in manufacturing exempted products, overturning the assessing officer's decision. The order demanding payment for duty paid on inputs for manufacturing DM water was reversed by both appellate authorities. The issue of maintaining separate accounts for dutiable and exempted final products was raised, questioning the liability of the assessee for payment equivalent to Cenvat credit. The High Court declined jurisdiction under Sections 35G and 35L of the Act, advising the appellant to seek remedy at the Apex Court.

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Issues:
1. Reversal of Cenvat credit for inputs used in manufacturing exempted products.
2. Assessment of duty paid on inputs for manufacturing DM water.
3. Maintaining separate accounts for dutiable and exempted final products.
4. Liability of the assessee for payment equivalent to Cenvat credit.
5. Jurisdiction of the High Court under Section 35G and 35L of the Act.

Analysis:

1. The appeal concerned the reversal of Cenvat credit for inputs used in manufacturing exempted products. The revenue contended that a proportionate reversal of credit sufficed to comply with Rule 6(2) and 6(3) of the Cenvat Credit Rules, 2004. The appellate authority upheld this position, overturning the assessing officer's decision to deny benefits to the assessee.

2. The assessing officer had determined that the assessee wrongly reversed an amount for duty paid on inputs used to manufacture DM water, contravening the Cenvat Credit Rules, 2004. Consequently, an order was issued demanding payment under Rule 14 of the Cenvat Credit Rules, 2004, read with Rule 5 and Section 11A of the Central Excise Act, 1944. However, both the 1st and 2nd appellate authorities reversed this order.

3. The issue of maintaining separate accounts for dutiable and exempted final products was raised. The assessee was using common inputs and input services for both types of products without segregating them. The question arose whether the assessee, in such circumstances, had the option to pay an amount equivalent to the Cenvat credit used in manufacturing final products like steam.

4. The judgment highlighted that the determination of liability fell under the purview of Section 35G and 35L of the Act. It was noted that such matters should be addressed in appeals before the Apex Court, as per the statutory provisions.

5. Consequently, the High Court declined to entertain the appeal, deeming it not maintainable within its jurisdiction. The appellant was granted liberty to approach the Apex Court under Section 35L of the Act for further redressal. The order rejected the appeal while allowing the appellant to seek remedy at the higher judicial forum.

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