CENVAT credit utilisation and common input services dispute narrowed to the verified normal-period demand and limited interest.

Credible contemporaneous records, including Chartered Accountant certification and return data, supported the appellant's computation that CENVAT credit utilisation did not exceed the prescribed limit, so the demand on that count did not survive. On the treatment of disputed input services as common input services under Rule 6(5) of the CENVAT Credit Rules, 2004, the appellant established coverage for a substantial portion of invoices but not for all remaining invoices, so relief was only partial. The controversy was treated largely as one of classification and verification rather than deliberate suppression, which confined the surviving demand to the normal period and limited the interest accordingly.

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Issues: (i) Whether the appellant had wrongly utilised CENVAT credit in excess of the prescribed limit; (ii) whether the disputed input services were correctly treated as common input services falling under Rule 6(5) of the CENVAT Credit Rules, 2004, and what consequential demand, interest, and penalty, if any, survived.

Issue (i): Whether the appellant had wrongly utilised CENVAT credit in excess of the prescribed limit.

Analysis: The appellant produced Chartered Accountant certification and return data to show that, on the method of computation accepted by it, the credit utilised did not exceed the permissible limit. The calculation adopted by the department was found to be based on a different method, whereas the figures, when examined on the appellant's basis, resulted in utilisation at the prescribed percentage. The record also supported the appellant's bona fide understanding of the credit mechanism.

Conclusion: This issue was held in favour of the appellant and the proposed demand on this count did not survive.

Issue (ii): Whether the disputed input services were correctly treated as common input services falling under Rule 6(5) of the CENVAT Credit Rules, 2004, and what consequential demand, interest, and penalty, if any, survived.

Analysis: The certificates produced by the appellant covered a substantial portion of the invoices, but the appellant had not established that all the remaining invoices were randomly selected and fully verified so as to displace the department's objection in entirety. At the same time, the material showed that the dispute was largely one of classification and verification rather than deliberate suppression. The Court therefore accepted closure of the dispute on payment of the normal-period amount and confined interest accordingly.

Conclusion: This issue was decided partly in favour of the appellant and partly in favour of the Revenue, with confirmation of the normal-period demand and limited interest.

Final Conclusion: The appeal succeeded on the first issue and failed only to the limited extent of the normal-period demand and interest on the second issue, with the remaining controversy brought to a close.

Ratio Decidendi: Where the computation of CENVAT credit utilisation is supported by credible contemporaneous records and the dispute is substantially one of classification and verification, the demand must be confined to the part that is actually established on the record, with consequential relief limited accordingly.

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