Tribunal reverses order, upholds compliance with Rule 6(3A) on cenvat credit, deems demand invalid

The Tribunal set aside the impugned order, allowing the appeal with consequential relief, due to misinterpretation by lower authorities regarding filing requirements under Rule 6(3A) and lack of dispute on reversal calculations made by the appellant. The appellant's compliance with procedures for reversing cenvat credit attributable to trading activities was upheld, emphasizing the sufficiency of the initial exercise of the option without annual filings. The demand raised solely based on alleged non-compliance with annual filing was deemed invalid.

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Issues:
1. Interpretation of Rule 6(3) and Rule 6(3A) of the Cenvat Credit Rules, 2004 regarding maintaining separate accounts and payment options.
2. Compliance with the procedural requirements under Rule 6(3A) for reversing cenvat credit attributable to trading activities.
3. Dispute over the necessity of filing intimation every year for exercising the option under Rule 6(3A).
4. Calculation and reversal of the amount attributable to exempted goods in monthly returns.
5. Validity of the demand raised of an amount equivalent to 6% of the value of trading activity due to alleged non-compliance.

Analysis:
1. The case involved a manufacturer of excisable goods engaged in trading activities who availed cenvat credit for inputs and input services common to both manufacturing and trading. The issue was whether the appellant correctly followed the provisions of Rule 6(3) and Rule 6(3A) of the Cenvat Credit Rules, 2004.

2. The appellant had filed an intimation under Rule 6(3A) regarding not maintaining separate accounts and had reversed the cenvat credit proportionate to trading activities in monthly returns. The appellant argued compliance with the procedure, citing the case of Mercedes Benz India (P) Ltd. vs. CCE, Pune-I. The departmental representative contended non-compliance due to lack of separate accounts and failure to exercise the option under Rule 6(3A) as required.

3. The main contention revolved around the necessity of filing the intimation every year for exercising the option under Rule 6(3A). The Tribunal found no such requirement in the rules and criticized the lower authorities for misinterpreting this aspect. The Tribunal held that the appellant's initial exercise of the option sufficed without annual filings.

4. The Tribunal noted that the appellant correctly followed the procedures under Rule 6(3A) by calculating and reversing the amount attributable to exempted goods in monthly returns. Both lower authorities did not dispute this calculation, leading the Tribunal to question the validity of the demand raised solely on the grounds of alleged annual filing non-compliance.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief, highlighting the misdirection by the lower authorities in interpreting the filing requirements under Rule 6(3A) and the lack of dispute regarding the reversal calculations made by the appellant.

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