Manufacturers granted Cenvat credit relief for exempted goods. Revenue cannot dictate reversal option.

The Tribunal allowed the appellants, manufacturers of excisable goods, to avail Cenvat credit and reverse proportionate credit for exempted goods under Rule 6(3)(ii) of the Cenvat Credit Rules. The Tribunal set aside the order-in-original and remanded the matter to calculate the reversal amount and interest payable. It emphasized that the revenue cannot impose a specific option under Rule 6(3) on the appellant and that the appellant's willingness to pay interest on reversed amounts is significant in decision-making.

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Issues:
1. Availing Cenvat credit on input services used for both excisable goods and goods chargeable to nil rate of duty.
2. Demand raised against the appellant for not maintaining separate records for common services.
3. Imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004.

Analysis:
Issue 1:
The appellants, manufacturers of excisable goods, availed Cenvat credit amounting to Rs. 54,01,113/- from July 2008 to June 2009. The revenue demanded Rs. 2,32,23,720/- as the appellants did not maintain separate records for common services used for both excisable and exempted goods. The appellant argued that certain services were covered under Rule 6(5) of the Cenvat Credit Rules, exempting them from credit reversal even if used for exempted goods. They also maintained separate records for some input services. The Tribunal observed that the appellants opted for the option under Rule 6(3)(ii) and paid the amount as required, allowing them to reverse proportionate credit for exempted goods.

Issue 2:
The revenue contended that the appellant should have discharged interest liability if any other option under Rule 6(3) was chosen. The Tribunal held that the appellant's offer to reverse proportionate credit under Rule 6(3)(ii) cannot be denied, and interest must be paid on the reversed amounts. The order-in-original was set aside, and the matter was remanded to the Commissioner to calculate the reversal amount and interest payable.

Issue 3:
The Tribunal found that no option under Rule 6(3) could be imposed on the appellant, emphasizing that the appellant's choice of availing the option of proportionate credit under Rule 6(3)(ii) cannot be refused. The Tribunal directed the Commissioner to determine the amount to be reversed and the corresponding interest. The judgment highlights that the revenue cannot insist on a specific option under Rule 6(3) for the appellant, and the appellant's readiness to pay interest on reversed amounts is a crucial factor in the decision-making process.

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