Tribunal Decision Upheld on CENVAT Credit Reversal: Rule 6(3) Compliance Key

The High Court upheld the Tribunal's decision, ruling that the appellant was not required to pay 6% of the exempted service value. The Court emphasized the necessity of verifying the proportionate credit reversal as per Rule 6(3) of CCR. The Tribunal's decision, supported by legal precedents, stressed the significance of proportionate reversal of CENVAT credit. The case was remanded to the original authority for verification of the credit reversal, with instructions to issue a new order after allowing the appellant to provide supporting documents.

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Issues:
Appeal against Commissioner (Appeals) order upholding Order-in-Original and rejecting appellant's appeal regarding CENVAT credit on common input services used in manufacturing and trading activities.

Analysis:
1. Facts of the Case: The appellant, engaged in manufacturing various goods falling under different chapters, availed CENVAT credit on common input services used in both manufacturing and trading activities. The Department demanded 6% of the value of traded goods for not maintaining separate inventory as per Rule 6 of CENVAT Credit Rules (CCR).

2. Appellant's Arguments: The appellant argued that the impugned order did not consider their submission and demanded 6% of the value without acknowledging that a proportionate reversal of credit would suffice. They cited legal precedents to support their claim that reversing CENVAT credit should negate the 6% demand.

3. Department's Defense: The Department contended that the appellant failed to submit a worksheet showing the reversal of proportionate CENVAT credit.

4. Tribunal's Decision: The Tribunal noted that the appellant had indeed reversed the proportionate CENVAT credit before the adjudication order. Citing legal precedents, the Tribunal held that once credit is reversed, it should be considered as not availed. The Tribunal directed a remand to verify if the reversal satisfied the proportionate requirement, emphasizing no justification for the 6% demand.

5. High Court's Decision: The High Court dismissed the Revenue's appeal, upholding the Tribunal's decision that the appellant need not pay 6% of the exempted service value. The Court emphasized the need for verification of the proportionate credit reversal as per Rule 6(3) of CCR.

6. Final Order: The Tribunal allowed the appeal by remanding the case to the original authority for verification of the proportionate credit reversal. The original authority was directed to issue a new order after affording the appellant an opportunity to produce supporting documents.

In conclusion, the Tribunal's decision, supported by legal precedents, emphasized the importance of proportionate reversal of CENVAT credit and directed a remand for verification, ultimately granting relief to the appellant against the 6% demand on exempted services.

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