Tribunal sets aside payment order & penalty, directs interest payment for late cenvat credit reversal.

The Tribunal set aside the order for payment under Rule 6(3)(b) and penalty imposed on the appellant, while directing the appellant to pay interest for the late reversal of cenvat credit on inputs used for manufacturing exempted goods. The appellant's compliance with the amended provisions of Rule 6 of the Cenvat Credit Rules, 2004 was recognized, leading to the favorable outcome of the appeal.

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Issues:
1. Appeal against order of Commissioner of Customs and Central Excise
2. Non-payment of 5% / 10% amount under Rule 6(3)(i) of Cenvat Credit Rules, 2004
3. Reversal of cenvat credit on exempted goods
4. Interpretation of Rule 6 of Cenvat Credit Rules, 2004
5. Liability to pay interest on late reversal of cenvat credit

Analysis:
1. The appeal challenged the order of the Commissioner of Customs and Central Excise (Appeals-I), Jaipur. The appellant, engaged in manufacturing Antibiotics, Hydrocortisone, and Quinine Sulphate, faced a demand of Rs. 20,79,378/- and an equal penalty for not paying the 5% / 10% amount under Rule 6(3)(i) of the cenvat credit rules, 2004. The Commissioner upheld the demand, leading to the appeal before the Tribunal.

2. The appellant argued that upon audit findings regarding cenvat credit on exempted goods, they reversed the credit proportionately. The packing material and inputs used were common for both dutiable and exempted goods, and the appellant reversed the credit accordingly. Citing a Tribunal decision, the appellant contended they were not required to pay the 5% / 10% amount on exempted services.

3. The Tribunal examined Rule 6 of the Cenvat Credit Rules, 2004, amended by the Finance Act, 2010. The appellant's reversal of proportionate credit on common inputs was deemed compliant with the amended provisions. However, the appellant was held liable to pay interest for late reversal of cenvat credit on inputs used for manufacturing exempted goods.

4. The judgment distinguished a previous case cited by the Revenue, noting it was delivered before the amendment of Rule 6. The impugned order was set aside concerning the payment under Rule 6(3)(b) and penalty imposition. The appellant was directed to pay interest at the prescribed rate for belated payments on a proportionate basis for inputs used in exempted goods.

5. In conclusion, the Tribunal disposed of the appeal by setting aside the order for payment under Rule 6(3)(b) and penalty, while directing the appellant to pay interest for late reversal of cenvat credit on inputs used for manufacturing exempted goods.

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