2018 (1) TMI 43 - AT - Central Excise

Tribunal overturns Order on CENVAT credit for manufacturing; compliance with Rule 6(3)(ii) upheld

Air Liquide India Holdings Pvt. Ltd. Versus C.C.E. & Cus., Bharuch

The Tribunal set aside the Order-in-Original regarding CENVAT credit on input services for manufacturing both dutiable and exempted final products, as the ... Recovery of 5%/6% of the value of the exempted goods - non-compliance with the provision of Rule 6(3(ii) & (iii) of CCR, 2004 - Held that: - the Appellant had indicated inclusion of the clearance value to SEZ/100% EOU in arriving at the total turnover of the goods cleared. Even though the show cause notice was issued a year after i.e. 9.6.2014, no allegation on the correctness of proportionate credit reversed has been made out against the Appellant - the ld. Commissioner has travelled beyond the scope of the allegations leveled in the SCN which cannot be sustained. Since the ld. Commissioner has categorically observed that the Appellant had complied with the conditions of Rule 6(3)(ii) of CCR, 2004, the amount of 5%/6% of the exempted products sought to be recovered in the SCN cannot be sustained. Appeal allowed - decided in favor of appellant. Issues:Appeal against Order-in-Original regarding CENVAT credit on input services for manufacturing both dutiable and exempted final products without following prescribed procedure.Analysis:1. The Appellant was engaged in manufacturing excisable goods and availed CENVAT credit on input services for both dutiable and exempted products without following Rule 6(3)(ii) & (iii) of CENVAT Credit Rules, 2004. The demand notice was issued for recovery of 5%/6% of the value of exempted products for a specific period. The Commissioner reduced the demand, but the Appellant appealed.2. The Appellant's Advocate argued that the Commissioner's observation on the quantum of credit reversed was beyond the show cause notice's scope. The Appellant had complied with Rule 6(3)(ii) by reversing proportionate credit. Citing legal precedents, the Advocate contended that the Commissioner's observation was bad in law. The Appellant had correctly applied Rule 6(3A) in determining the credit attributable to exempted products.3. The Advocate further argued that clearance to SEZ should not be treated as exempted supplies as per Rule 6(6) of CCR, 2002. The Appellant had timely intimated the reversal of proportionate credit, indicating no suppression of facts. Therefore, invoking a larger limitation period was deemed unlawful.4. The Revenue's representative supported the Commissioner's findings, but the Tribunal found merit in the Appellant's contentions. The Tribunal noted that the demand notice did not question the correctness of the credit reversed by the Appellant. Citing a Gujarat High Court judgment, the Tribunal emphasized that the adjudication should be confined to the show cause notice's allegations. As the Appellant had complied with Rule 6(3)(ii), the demand in the notice was unsustainable. Consequently, the impugned order was set aside, and the Appeal was allowed.