Tribunal allows appellant's credit reversal for exempted products, sets aside duty demand

The Tribunal ruled in favor of the appellant, setting aside the confirmed duty demand with interest. The appellant's periodic reversal of proportionate cenvat credit for exempted final products was deemed compliant with Rule 6(3) of the Cenvat Credit Rules, 2004. The Tribunal held that no additional duty payment was necessary if the credit for exempted products was reversed appropriately, rejecting the argument that the appellant failed to maintain separate accounts for furnace oil. The appeal was allowed with consequential relief, overturning the Commissioner (Appeals)' decision on the duty payment issue.

---

---

Issues:
- Appeal against confirmed duty demand with interest
- Maintaining separate accounts for furnace oil
- Reversal of cenvat credit for exempted final products
- Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004

Analysis:
The appellant appealed against the confirmed duty demand with interest due to not maintaining separate accounts for furnace oil used in both dutiable and exempted final products. The appellant argued they periodically reversed proportionate cenvat credit for exempted final products as per the Apex Court's decisions. The Commissioner (Appeals) confirmed the demand with interest but dropped the penalty. The key issue was whether the reversal of cenvat credit for exempted products was sufficient under Rule 6(3) of the Rules.

The appellant contended that they complied with Rule 6(3) by reversing proportionate cenvat credit for exempted final products, citing relevant court cases. On the other hand, the AR argued that the appellant failed to maintain separate accounts for furnace oil as required, thus necessitating payment equal to 10% of the sale price of exempted products. The AR emphasized that the appellant did not follow the formula in Rule 6(3)(c)(i) for reversing cenvat credit.

The Tribunal deliberated on whether the appellant's reversal of cenvat credit for exempted products was adequate for Rule 6(3) compliance. Both lower authorities acknowledged the reversal but differed on the duty payment issue. Relying on a Gujarat High Court decision, the Tribunal ruled that if cenvat credit for exempted products was reversed proportionately, no additional duty payment was required. The Tribunal rejected the AR's objection regarding the calculation basis for the credit reversal, noting that the Commissioner (Appeals) failed to quantify any demand beyond the appellant's compliance with the rule. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.

---