2019 (4) TMI 1684 - AT - Central Excise

Appeal partially granted, penalty set aside, matter remanded for duty liability determination. Detailed reasoning provided.

The Tribunal partly allowed the appeal, setting aside the penalty and remanding the matter for determining the duty liability for the normal period. The ... CENVAT Credit - electricity - electricity in their co-generation power plant, used captively in their factory and the excess power is sold to Tamil Nadu Electricity Board (TNEB) - common input used in the manufacture of both dutiable and exempted final products - non-maintenance of separate records - Extended period of limitation - HELD THAT:- The issue has been laid to rest by this very Bench, in the case of M/S. INDIA CEMENTS LTD. VERSUS CCE & ST, TIRUNELVELI [2018 (3) TMI 180 - CESTAT CHENNAI] where it was held the appellants are liable to pay an amount of ₹ 2,66,09,847/- being the amount equal to 6% of the value of the electricity not used within the factory of production, along with interest at appropriate rates thereof - decided against Assessee. Time Limitation - HELD THAT:- There was no justification for the Revenue to invoke the larger period of limitation and hence, the demand cannot survive for the entire period. Therefore, the demand, if any, will have to be restricted to the normal period and for this limited exercise of determining the duty liability for the normal period, the matter is remanded to the file of the adjudicating authority. Appeal allowed in part. Issues:1. Applicability of Rule 6(2) of the CENVAT Credit Rules, 2004 for maintaining separate accounts.2. Demand of CENVAT Credit availed on input services used in the manufacture of exempted products.3. Extended period of limitation for demanding CENVAT Credit.4. Inclusion of attributable credit in respect of electricity to the exempted turnover.5. Penalty under Section 11AC of the Central Excise Act, 1944.Analysis:Issue 1: Applicability of Rule 6(2) of the CENVAT Credit Rules, 2004The appellant, engaged in manufacturing dutiable and exempted products, faced a Show Cause Notice for not maintaining separate accounts as required under Rule 6(2) of the CENVAT Credit Rules, 2004. The dispute revolved around the usage of common inputs in manufacturing both types of products.Issue 2: Demand of CENVAT Credit on Input ServicesThe Show Cause Notice demanded the amount equal to the attributable CENVAT Credit availed on input services used in the manufacture of exempted products. The appellant contested the notice, citing bona fides and challenging the demand based on the period of limitation, as they argued that periodic audits by the Revenue indicated awareness of their activities.Issue 3: Extended Period of LimitationThe appellant argued against invoking the extended period of limitation, presenting evidence of Revenue's knowledge of their activities since 2005. The retrospective amendment to Rule 6 was highlighted, leading to the reversal of CENVAT Credit for exempted goods. The Tribunal remanded the matter to determine the duty liability for the normal period.Issue 4: Inclusion of Attributable Credit in Respect of ElectricityThe Tribunal referred to a previous case to uphold the liability of the appellant to pay an amount for the electricity not used within the factory for production. The decision was made against the appellant on this issue.Issue 5: Penalty ImpositionRegarding penalty imposition, the Tribunal considered past litigation and Supreme Court judgments to waive the penalty imposed under Rule 15. Mitigating factors applied, leading to the setting aside of the penalty imposed under Rule 15.In conclusion, the Tribunal partly allowed the appeal, setting aside the penalty and remanding the matter for determining the duty liability for the normal period. The decision provided detailed reasoning for each issue raised in the case, ensuring a comprehensive analysis of the legal aspects involved.