Tribunal Overturns Order Demanding 6% on Exempted Goods, Emphasizes Natural Justice

The Tribunal set aside the Order-in-Appeal demanding 6% of the value of exempted goods/non-excisable goods due to common input services usage without separate accounts. The Tribunal found that the first appellate authority erred in solely relying on an explanation inserted by notification without considering the factual contentions raised by the appellant. The matter was remanded back to the first appellate authority for reconsideration, emphasizing the importance of following the principles of natural justice.

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Issues involved:
Demand of an amount equivalent to 6% of the value of exempted goods/non-excisable goods due to common input services usage without separate accounts.

Analysis:
The appeal was against an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Pune - II. The issue revolved around the demand for an amount equivalent to 6% of the value of exempted goods/non-excisable goods manufactured by the appellant, who allegedly used common input services like 'GTA service' and 'repair and maintenance service' for boilers without maintaining separate accounts. The Revenue claimed that due to the consumption of these services in the factory premises, the appellant needed to reverse the amount equivalent to 6% of the value of the steam sold. The appellant argued that they did not avail CENVAT credit for service tax paid on repairs and maintenance of the boiler and that the GTA service was used solely for transporting sugar cane. The adjudicating authority held that Rule 6(3) applied, which the appellant contested before the first appellate authority. However, the first appellate authority rejected the appellant's contentions solely based on an explanation inserted by notification No. 06/2015-CE (NT) to Rule 6 of CENVAT Credit Rules, 2004, without delving into the merits of the case. The Tribunal noted that the said explanation did not specify if it was retrospective, and the period in question was from March 2008 to October 2012. The Tribunal opined that the first appellate authority should have considered the factual contentions raised by the appellant instead of relying solely on the inserted explanation. Consequently, the Tribunal set aside the impugned order and remanded the matter back to the first appellate authority for reconsideration, emphasizing the need to follow the principles of natural justice.

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