2015 (10) TMI 2078 - AT - Central Excise

Appellant's Appeal Dismissed for Non-Compliance with Tax Rules

Volvola Corporation Versus Commissioner of Central Excise, Mumbai-III

The appellant's appeal against the liability to pay 10% under Rule 6(3) of CCR was dismissed due to failure to maintain separate accounts for inputs and ... Denial of Input credit - Non maintenance of separate accounts - Held that:- Requirement of Rule 6(3), wherein on assessee does not maintain separate records of inputs consumed in the manufacture of duty paid and exempted output, the assessee is required either pay an amount at the fixed percentage (10%/6%) of value of the exempted goods/services or pay an amount as determined under sub-rule (3A). Sub-rule (3A) provides for reversal of proportionate amount attributable to the inputs consumed in the manufacture and clearance of goods without payment of duty. Further sub-rule (3A) provides for filing of an intimation by the assessee giving details as-the name, address, registration number, number of manufactured goods, date from which the option under the clause is exercised or proposed to be exercised, description of dutiable and exempted output and Cenvat Credit of inputs and input services lying in the balance as on date as exercising the option. Only for the reason of non-filing or delayed filing of intimation under sub-rule (3A), as assessee cannot be required to pay the fix percentage by way of reversal under Rule 6(3), where the assessee have paid the amount by way of reversal which amounts to substantial compliance. It is further admitted fact that the assessee has intimated the fact of reversal by making categorical mention in the ER-1 returns. I hold that the appellant had made substantial compliance of sub-rule (3A) of Rule 6 of Cenvat Credit Rules. - Decided in favour of assessee. Issues:1. Liability to pay 10% under Rule 6(3) of CCR for goods cleared without duty under notification.2. Requirement to maintain separate records of inputs under Rule 6(2) of Cenvat Credit Rules.3. Applicability of Rule 6(3A) for reversal of proportionate amount attributable to inputs.4. Compliance with the procedural requirements of Rule 6(3A) for payment of duty.5. Entitlement to refund of amounts paid during the appeal process.Analysis:1. The appellant-assessee appealed against the Order-in-Appeal, arguing against the liability to pay 10% under Rule 6(3) of CCR for goods cleared without duty under a notification. The Commissioner (Appeals) held that the appellant failed to maintain separate accounts for inputs as required by Rule 6(2) and did not follow the procedure under Rule 6(3A) introduced from 1.4.2008. Consequently, the appeal filed by the revenue was allowed, requiring the appellant to pay duty under Rule 6(3) of the Cenvat Credit Rules.2. The issue of maintaining separate records of inputs under Rule 6(2) of Cenvat Credit Rules was raised. The adjudicating authority initially dropped the demand, citing the appellant's compliance with maintaining a separate account of inputs. However, the Commissioner (Appeals) found that the appellants failed to maintain the required separate account for inputs consumed in the manufacture of duty paid and exempted output, leading to the requirement to pay duty under Rule 6(3) of the Cenvat Credit Rules.3. The Tribunal analyzed the applicability of Rule 6(3A) for the reversal of the proportionate amount attributable to inputs consumed in the manufacture and clearance of goods without payment of duty. It was noted that the appellant had intimated the reversal of credit in the ER-1 returns, indicating substantial compliance with the requirements of Rule 6(3A). Citing a precedent, the Tribunal held that non-filing or delayed filing of intimation under sub-rule (3A) does not mandate payment of a fixed percentage under Rule 6(3) if substantial compliance is demonstrated.4. The Tribunal further delved into the compliance with the procedural requirements of Rule 6(3A) for the payment of duty. It was established that the appellant had made substantial compliance with sub-rule (3A) of Rule 6 of Cenvat Credit Rules by reversing the credit and providing intimation through the ER-1 returns. As a result, the appeal was allowed, and the appellant was deemed entitled to a refund of the amounts paid during the appeal process, along with interest as per rules.5. Lastly, the issue of entitlement to a refund of amounts paid during the appeal process was addressed. The Tribunal directed the adjudicating authority to disburse the refund within 45 days from the date of receipt of the order, along with interest as per rules, acknowledging the appellant's compliance and entitlement to the refund.