Rule 6 reversal and procedural document lapses cannot defeat otherwise valid Cenvat credit entitlement.

Rule 6 of the Cenvat Credit Rules was treated as a reversal mechanism, not a charging provision, so the 6% demand on exempted clearances was unsustainable where separate records were kept for inputs and capital goods, only limited common input services were involved, and the attributable credit had already been reversed under intimation to the Department. Denial of Cenvat credit was also found unjustified because the documents were originally produced and the later use of photocopies arose from a procedural lapse when originals were misplaced. The Tribunal set aside the impugned order and granted consequential relief.

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Issues: (i) Whether the demand of 6% amount under Rule 6 of the Cenvat Credit Rules, 2004 was sustainable in respect of exempted clearances where separate accounts were maintained for inputs and capital goods and only limited common input services were involved. (ii) Whether cenvat credit could be denied on the ground that the documents were initially produced in photocopy and the originals were produced later.

Issue (i): Whether the demand of 6% amount under Rule 6 of the Cenvat Credit Rules, 2004 was sustainable in respect of exempted clearances where separate accounts were maintained for inputs and capital goods and only limited common input services were involved.

Analysis: Separate records had been maintained for inputs and capital goods, and only a few common input services were not separately segregated. The exempted clearances were also of negligible extent compared with dutiable clearances. The amount attributable to exempted goods was reversed on advice and under intimation to the Department. Such reversal was treated as equivalent to not availing credit at all for the exempted goods. Rule 6 was held to be only a reversal mechanism and not a charging provision.

Conclusion: The demand under Rule 6 was not sustainable and was decided in favour of the assessee.

Issue (ii): Whether cenvat credit could be denied on the ground that the documents were initially produced in photocopy and the originals were produced later.

Analysis: The credit had been availed on original documents, but the originals were misplaced and could not be produced during investigation. The lapse was treated as procedural, and the credit was not regarded as inadmissible merely for that reason. The Tribunal applied the principle that substantial benefit should not be denied for a small procedural lapse.

Conclusion: Denial of credit on this ground was unsustainable and was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the assessee was held entitled to consequential relief in accordance with law.

Ratio Decidendi: Reversal of credit attributable to exempted goods can amount to non-availment of credit, and a procedural defect in documentary production does not justify denial of substantive cenvat credit when the entitlement is otherwise established.

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