Appeal allowed as appellant's actions complied with Cenvat Credit Rules, demand barred by limitation. Impugned order set aside.

The appeal was allowed with consequential relief as the appellant's actions complied with the Cenvat Credit Rules, and the demand was barred by limitation. The impugned order dated 19.06.2018 was set aside.

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Issues Involved:
1. Obligation to maintain separate accounts of inputs and input services under Rule 6(2) and Rule 6(3) of the Cenvat Credit Rules.
2. Requirement to pay an amount equal to 6% of the value of exempted goods under Rule 6(3)(i).
3. Alteration of option under Rule 6(3) in mid-financial year 2012-13.
4. Bar of limitation on the confirmed demand.
5. Imposition of penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Act.

Detailed Analysis:

Issue No. (i) & (ii):
Obligation to Maintain Separate Accounts and Payment of 6% on Exempted Goods:
- Rule 6(2) post-01.03.2011 mandates maintaining separate accounts of "inputs used" and "use" of input services. The appellant adopted a back calculation method for compliance, which was undisputedly accepted.
- Both the show cause notice and the impugned order acknowledged the impracticality of maintaining separate accounts for inputs used in exempted DI Pipes due to the exemption determination at the time of clearance.
- The appellant reversed the duty/tax paid on inputs and input services proportionately, which was acknowledged in the impugned order.
- Established case law supports that proportionate reversal of credit satisfies Rule 6(2) requirements, negating the need for payment under Rule 6(3)(i).

Issue No. (iii):
Alteration of Option in Mid-2012-13:
- The appellant started reversing cenvat credit from July 2012 after being pointed out by the jurisdictional Range Superintendent, which continued in subsequent years.
- The Tribunal's decision in Tata Steel Ltd. Vs. CCEx. & ST, Jamshedpur, supported that exercising the option mid-year does not violate Rule 6(3) provisions, as long as it is continued for the remaining financial year.
- The impugned order's contention that the option must be exercised by writing to the Range Officer was rejected by precedents, affirming that procedural lapses do not negate substantive compliance.

Issue No. (iv):
Bar of Limitation:
- The appellant's compliance with Rule 6(2) was known to the Department through ER-1 returns and audits from 2012-13 to 2014-15.
- The show cause notice issued on August 2, 2017, was beyond the normal 2-year period, making the demand barred by limitation.
- The Supreme Court's consistent principle that no suppression or intent to evade duty was present, thus extended period invocation was unjustified.

Issue No. (v):
Imposition of Penalty:
- Given that the demand itself is unsustainable and barred by limitation, the imposition of interest under Section 11AA and penalty under Rule 15(2) read with Section 11AC is also unsustainable.

Conclusion:
The impugned order dated 19.06.2018 was set aside, and the appeal was allowed with consequential relief, as the appellant's actions complied with the Cenvat Credit Rules, and the demand was barred by limitation.

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