2018 (9) TMI 897 - AT - Central Excise

Tribunal upholds Commissioner's decision on exempted goods credit dispute, stresses Cenvat Credit Rules compliance

The Tribunal dismissed the appeal, upholding the decision of the Commissioner (Appeals) to set aside the demand for payment of 10% of the value of ... Wrongful availment of CENVAT credit, reversed later demand alongwith Interest and Penalty - Demand is raised alleging that the appellant has availed credit wrongly on common inputs for exempted as well as dutiable products - Held that:- In the case of C.C.E. Chennai-II Vs. Mount Mettur Pharmaceuticals Ltd. [2017 (9) TMI 1375 - MADRAS HIGH COURT], the Hon’ble jurisdictional High Court has considered a similar issue and observed that when the credit has been reversed along with interest, there is no liability to pay up 10%, as demanded by the Department - demand cannot sustain - appeal dismissed - decided against Revenue. Issues:1. Availment of credit on common inputs for exempted and dutiable products without maintaining separate accounts.2. Liability to pay 10% of the value of exempted goods under Rule 6(3)(b) of the Cenvat Credit Rules, 2005.3. Reversal of credit attributable to exempted goods and its impact on demand, interest, and penalties.Analysis:Issue 1: The case involved the appellant allegedly availing credit on common inputs for both exempted and dutiable products without maintaining separate accounts. The Department contended that this action made them liable to pay 10% of the value of exempted goods as per Rule 6(3)(b) of the Cenvat Credit Rules, 2005.Issue 2: The Tribunal considered the precedent set by the Hon'ble jurisdictional High Court in similar cases, such as C.C.E. Chennai-II Vs. Mount Mettur Pharmaceuticals Ltd., where it was observed that when the credit has been reversed along with interest, there is no obligation to pay the 10% demanded by the Department. Relying on this interpretation, the Tribunal concluded that the demand could not be sustained, and the Commissioner (Appeals) was correct in setting it aside.Issue 3: The respondent had reversed the credit attributable to exempted goods along with interest, which the Tribunal deemed equivalent to non-availment of credit. The Tribunal found that the demand made by the Department was not valid in light of the reversal of credit and interest. Consequently, the Tribunal dismissed the appeal, upholding the decision of the Commissioner (Appeals) to set aside the demand.In summary, the Tribunal dismissed the appeal after considering the reversal of credit attributable to exempted goods and the legal precedent that negated the Department's demand for payment of 10% of the value of exempted goods. The decision highlighted the importance of complying with Cenvat Credit Rules and maintaining separate accounts for exempted and dutiable products to avoid such disputes in the future.