Appellant liable to reverse Cenvat credit for unsold area post-occupation certificate under Rule 6(3) of CCR.

The court held that the appellant was liable to reverse Cenvat credit under Rule 6(3) of CCR for the unsold area post-occupation certificate, as it became an exempted activity. The court upheld the department's method of calculating the reversal amount and adjusted the penalty to match the demand raised in the show cause notice, reducing it to Rs. 21,33,150/-. The appeal was allowed in part, setting aside the impugned order but maintaining the reversal of Rs. 10,13,174/- already admitted and reversed by the appellant.

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Issues Involved:
1. Whether the appellant is liable to reverse Cenvat credit under Rule 6(3) of CCR for the unsold area post-occupation certificate.
2. The correctness of the quantification of the amount of reversal.
3. The discrepancy between the demand raised in the SCN and the confirmed demand in the O-I-O.

Issue-wise Summary:

1. Liability to Reverse Cenvat Credit:
The appellants argued that their "works contract service" was an output service and not exempt, thus not requiring reversal under Rule 6(3) of CCR. They cited the Tribunal Ahmedabad's decision in Alembic Limited Vs. CCE. However, the court found that post-occupation certificate, the unsold area of 46,200 sq.ft became an exempted activity, necessitating the reversal of Cenvat credit as per Rule 6(1) of the Cenvat Credit Rules, 2004. This was supported by the Hon'ble Apex Court's decision in LALLY AUTOMOBILES PVT. LTD. Versus COMMISSIONER, which established that non-taxable activities fall outside the purview of the Cenvat Credit Scheme.

2. Quantification of Reversal Amount:
The appellants contested the department's method of calculating the reversal amount, suggesting that only the Cenvat credit balance as of the occupation certificate date should be considered. The department used a formula to determine the ineligible Cenvat Credit to be reversed. The court upheld the department's computation, stating that the entire credit attributable to the construction of the unsold area must be considered, aligning with the Apex Court's decision in Larry Automobile.

3. Discrepancy in Demand:
The appellants pointed out that the SCN demanded a reversal of Rs. 21,33,150/-, but the O-I-O confirmed a demand of Rs. 31,46,324/-. The court acknowledged this discrepancy, noting that the SCN is the foundation of an Order. Therefore, the adjudicating authority erred in confirming a demand beyond what was raised in the SCN. Consequently, the penalty imposed under Section 78 was scaled down to Rs. 21,33,150/-, matching the demand in the SCN.

Conclusion:
The appeal was allowed in part, with the court setting aside the impugned order but maintaining the reversal of Rs. 10,13,174/- already admitted and reversed by the appellant. The penalty was adjusted to align with the demand raised in the SCN.

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