2019 (4) TMI 169 - AT - Central Excise

Tribunal allows appeal, rejects department demand. Procedural option, compliance with CENVAT Credit Rules emphasized.

JSW Steel Limited Versus Commissioner of Central Excise, Salem

JSW Steel Limited Versus Commissioner of Central Excise, Salem - TMI Issues Involved:1. Irregular availing of CENVAT credit on inputs and input services.2. Non-maintenance of separate accounts for common inputs/input services.3. Applicability of sub-rule (3) of Rule 6 of CENVAT Credit Rules, 2004.4. Reversal of proportionate credit.5. Limitation and invocation of extended period for issuing show cause notice.Detailed Analysis:1. Irregular Availing of CENVAT Credit:The appellants were engaged in manufacturing iron and steel products and were registered with the Central Excise department. The Preventive Unit officers discovered that the appellants were irregularly availing CENVAT credit on inputs such as lubricants, welding electrodes, and metal cutting gas, and on input services like Manpower Recruitment, Maintenance and Repair, Material Handling, and Business Auxiliary Services. These inputs and services were used for both dutiable and exempted goods without maintaining separate accounts.2. Non-Maintenance of Separate Accounts:The appellants did not maintain separate accounts for common inputs/input services as required under sub-rule (3) of Rule 6 of CENVAT Credit Rules, 2004. The department contended that the appellants had not exercised the option to pay proportionate credit on inputs/input services used in the manufacture of exempted goods, making them liable to pay an amount equivalent to 10% or 5% of the value of the exempted product, metallurgical coke.3. Applicability of Sub-rule (3) of Rule 6 of CENVAT Credit Rules, 2004:The department's view was that the appellants were liable to pay the specified percentage on the value of exempted goods due to their failure to maintain separate accounts or properly exercise the option to reverse proportionate credit. The appellants argued that they had reversed the proportionate credit attributable to exempted products, as evidenced by letters dated 20.07.2009 and 26.12.2011, which informed the department of their reversal of credit on inputs/input services attributable to exempted goods.4. Reversal of Proportionate Credit:The appellants argued that their letters to the department constituted sufficient intimation of their option to reverse proportionate credit under clause (ii) of Rule 6 (3) of CENVAT Credit Rules, 2004. They cited the Tribunal’s decision in Mercedes Benz India (P) Ltd. vs. CCE Pune, which held that the delay in intimation could be considered a procedural lapse and not a mandatory requirement. The Tribunal agreed with this interpretation, noting that the main objective of Rule 6 is to ensure that CENVAT credit is not availed for inputs/input services used in exempted goods.5. Limitation and Invocation of Extended Period:The appellants contended that the show cause notice issued on 22.05.2013 was time-barred, as they had already informed the department of the reversal of credit in 2009 and 2011. The Tribunal found that the department's allegation of suppression of facts with intent to evade duty/tax was unjustified, as the appellants had provided sufficient intimation regarding their credit reversal.Conclusion:The Tribunal concluded that the demand raised by the department could not be sustained on merits or on the grounds of limitation. The impugned order was set aside, and the appeal was allowed with consequential benefits as per law. The Tribunal emphasized that the requirement to exercise the option for reversing proportionate credit is procedural and not mandatory, and the appellants had sufficiently complied with the provisions of Rule 6 (3) of CENVAT Credit Rules, 2004.