2021 (5) TMI 441 - AT - Central Excise

Tribunal Grants Appeal, Rules Demand Unsustainable under Rule 6(3)(i)

The Tribunal set aside the Commissioner (Appeals) order, allowing the appellant's appeal for consequential relief. The Tribunal held that the demand under ... CENVAT Credit - common inputs and input services attributable to exempted goods and goods having nil rate of duty - HELD THAT:- The issue involved in the present case is no longer res integra. The Hon’ble Telengana High Court, in M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT], has held that in the event the assessee is found to have availed Cenvat credit wrongly, Rule 14 of the Cenvat Credit Rules empowers the Authority to recover such credit which had been taken or utilized wrongly, along with interest and that the statutory scheme does not vest the Revenue authorities with the power of choice under, inter alia, Rule 6(3)(i) of the Cenvat Credit Rules. This decision has been followed by the Division Bench of this Tribunal in the case of M/S TATA STEEL LTD. VERSUS CCEX. & S. TAX, JAMSHEDPUR [2020 (7) TMI 698 - CESTAT KOLKATA]. It has been held therein that the demand confirmed under Rule 6(3)(i) of the Cenvat Credit Rules by the Adjudicating Authority/Commissioner (Appeals) by choosing such option in the show cause notice cannot be sustained. In the instant case also it is an undisputed fact that the appellant had reversed the entire amount of Cenvat credit as required under Rule 6(3)(ii) read with Rule 6(3A)(c) of the Cenvat Credit Rules - appeal allowed - decided in favor of appellant. Issues:Appeal against order of Commissioner of Central Tax (Appeals) rejecting appellant's appeal, confirming demand, interest, and penalty.Analysis:1. The appellant, an integrated steel plant, availed cenvat credit for manufacturing dutiable products. Reversed credit for exempted goods as per Rule 6 of Cenvat Credit Rules, reflected in monthly returns, with finalization before June 30 each year.2. Appellant exercised Rule 6(3)(ii) option for exempted goods' credit, but faced show cause notice alleging improper exercise and non-compliance, demanding payment under Rule 6(3)(i) along with interest and penalty.3. Appellant contended procedural error in payment timing, but compliance with final determination and payment by due date, challenging Commissioner (Appeals) decision based on incorrect interpretation of rules.4. Tribunal cited precedents like Tiara Advertising case, holding Rule 6(3)(i) demand unsustainable if credit wrongly availed and reversed, emphasizing absence of provision for automatic application of Rule 6(3)(i) when Rule 6(3)(ii) is opted.5. Upheld by Etrans Solutions case, where non-maintenance of separate accounts led to credit reversal, not invoking Rule 6(3)(i). Mercedes Benz case also supported appellant's compliance with Rule 6 provisions.6. Tribunal concluded demand unsustainable, setting aside Commissioner (Appeals) order and allowing appellant's appeal for consequential relief.This detailed analysis highlights the appellant's compliance with Cenvat Credit Rules, challenges faced due to alleged procedural errors, and the Tribunal's decision based on legal precedents and correct interpretation of the rules.