Tribunal sets aside order, appellant not liable for payment under Rule 6(3)(i). Separate records allowed for CENVAT credit.

The tribunal allowed the appeal, setting aside the impugned order. It held that the appellant is not liable to pay under Rule 6(3)(i) as the credit reversal complies with Rule 6(1). The appellant can maintain separate records and still avail CENVAT credit on common input services. The Revenue cannot enforce an option under Rule 6(3) on the appellant, and penalties under Rule 15 do not apply. The demand in the impugned order lacks legal basis once credits are reversed, leaving no cause of action for the Revenue.

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Issues Involved:
1. Whether the appellant is liable to pay an amount under Rule 6(3)(i) of the CENVAT Credit Rules, 2004.
2. Whether the appellant can maintain separate records for dutiable and exempted goods and still avail CENVAT credit on common input services.
3. Whether the reversal of CENVAT credit by the appellant amounts to not taking credit at all.
4. Whether the Revenue can enforce an option under Rule 6(3) on the appellant.
5. Whether a penalty equal to an amount calculated under Rule 6(3)(i) can be imposed under Rule 15.

Detailed Analysis:

1. Liability under Rule 6(3)(i):
The Revenue argued that the appellant must pay an amount equal to 10% of the value of the exempted goods under Rule 6(3)(i) since the appellant availed CENVAT credit on common input services. The appellant contended that they reversed the credit of Rs. 42,460/- along with interest, thus complying with the requirements under Rule 6(1). The tribunal held that as per the Supreme Court's decision in Chandrapur Magnet Wires (P) Ltd. versus Collector of Central Excise, once the credit is reversed, it is as good as not taking the credit at all. Therefore, the appellant is not liable under Rule 6(3)(i).

2. Maintenance of Separate Records and Availment of Credit:
The appellant maintained separate records for inputs used in the manufacture of dutiable and exempted goods and argued that they could still avail proportionate CENVAT credit on common input services. The tribunal found that nothing in Rule 6 prevents an assessee from maintaining separate accounts under Rule 6(2) and still availing proportionate CENVAT credit on common inputs or input services. The tribunal stated that the Commissioner erred in holding that maintaining separate accounts under Rule 6(2) disallows credit on common input services.

3. Reversal of CENVAT Credit:
The appellant reversed the credit of Rs. 42,460/- along with interest, and the tribunal held that this reversal is as good as not taking the credit at all, following the Supreme Court's decision in Chandrapur Magnet Wires. Therefore, the appellant complied with Rule 6(1), and there was no need to invoke Rules 6(2) and 6(3).

4. Enforcement of Options under Rule 6(3):
The tribunal held that Rule 6(3) provides options to the assessee, and the Revenue cannot enforce any particular option on the assessee. The tribunal cited the Andhra Pradesh and Telangana High Court's decision in M/s Tiara Advertising versus Union of India, which held that the statutory scheme does not vest the authorities with the power to make a choice on behalf of the assessee.

5. Imposition of Penalty under Rule 15:
The tribunal found that Rule 15 provides for a penalty equal to the wrongly availed CENVAT credit but not a penalty equal to an amount calculated as per Rule 6(3)(i). Since Rule 6(3)(i) is only one of the options for fulfilling obligations to be entitled to CENVAT credit, the imposition of an equivalent amount of penalty under Rule 15 is without authority of law.

Conclusion:
The tribunal allowed the appeal and set aside the impugned order with consequential relief to the appellant, concluding that:
- The Revenue cannot choose and enforce an option under Rule 6(3) on the appellant.
- An amount under Rule 6(3) cannot be demanded or recovered under Rule 14.
- No penalty equal to an amount under Rule 6(3) can be imposed under Rule 15.
- The entire demand in the SCN and confirmed in the impugned order is without any authority of law.
- Once the credit taken except the credit on services covered by Rule 6(5) and the credit on services received when the appellant was exclusively manufacturing dutiable goods has been reversed, the Revenue has no cause of action.

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