Tribunal rules against cenvat credit reversal demand, dismisses waste clearance reversal, and remands for verification.

The Tribunal set aside the demand for reversal of cenvat credit for trading activities under Rule 6(3)(i), citing precedents and lack of evidence. Additionally, the demand for reversal on waste and scrap clearance was dismissed as it did not arise during the manufacturing process. The matter was remanded for verification of the correctness of the reversals carried out on inputs and input services post-01.04.2015, ultimately resulting in the impugned order being set aside and the appeals disposed of accordingly.

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Issues involved:
1. Reversal of cenvat credit under Rule 6(3)(i) for trading activity.
2. Demand raised for reversal under Rule 6(3) for waste and scrap clearance without duty payment.

Analysis:

Issue 1: Reversal of cenvat credit for trading activity
The appellant, engaged in manufacturing auto parts, faced a demand for reversal of cenvat credit under Rule 6(3)(i) for trading activities. The appellant argued that they had already reversed proportionate input service credit for trading activities as per Rule 6(3)(iii) and that the demand under Rule 6(3)(i) was unwarranted. They cited precedents like Dalmia Bharat Sugar and Industries Ltd. vs. CCE, C&ST, New Delhi and Tata Technologies Ltd. vs. CCE, Pune-I to support their stance. The appellant contended that the inputs cleared as such had their credit reversed under Rule 3(5), and the department failed to provide evidence that these inputs were procured for trading. The appellant also argued that Rule 6 does not apply to waste and scrap clearance, citing Maruti Suzuki India Ltd. vs. CCE, Delhi-III. The Revenue justified the demand, stating that clearing inputs without manufacturing amounted to trading, attracting the reversal requirement under Rule 6(3)(i).

Issue 2: Demand for reversal for waste and scrap clearance
The second issue pertained to the clearance of waste and scrap without duty payment, triggering a demand for reversal under Rule 6(3). The appellant argued that such clearance did not fall under Rule 6 as the scrap did not arise during the manufacturing process. Citing the Maruti Suzuki India Ltd. case, the Tribunal agreed that the scrap of packing material did not warrant reversal under Rule 6(3). Consequently, the demand for cenvat credit reversal on waste and scrap clearance was set aside.

In conclusion, the Tribunal remanded the matter to the adjudicating authority to verify the correctness of the reversal carried out on inputs and input services, especially post-01.04.2015. The impugned order was set aside, and the appeals were disposed of accordingly.

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