Tribunal rules for appellant in liability case under Cenvat Credit Rules, 2004

The Tribunal ruled in favor of the appellant in a case concerning liability to pay a percentage of the value of exempted final products under Rule 6 (3) (i) of Cenvat Credit Rules, 2004. The demand for payment was not upheld as the appellant had already reversed the proportionate credit as required. Additionally, the show cause notice was deemed barred by limitation due to lack of evidence of intent to evade duty. The Tribunal set aside the order, allowing the appeal with consequential relief.

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Issues Involved:
1. Liability to pay 5% / 10% / 6% of the value of exempted final products under Rule 6 (3) (i) of Cenvat Credit Rules, 2004.
2. Whether the show cause notice is barred by limitation.

Summary:

Issue 1: Liability to pay 5% / 10% / 6% of the value of exempted final products under Rule 6 (3) (i) of Cenvat Credit Rules, 2004.

The appellants are engaged in the manufacture of Tapioca Starch and were found to be using common inputs for both dutiable and exempted products without maintaining separate accounts. The department issued a show cause notice demanding payment equivalent to 5% / 10% / 6% of the value of exempted goods under Rule 6 (3) (i) of CCR 2004. The appellant argued that they had reversed the proportionate credit as required under Rule 6 (3) (ii) before the issuance of the SCN. The Tribunal referred to the decision in Tiara Advertising Vs Union of India, which held that Rule 6 (3) merely offers options to an output service provider and does not allow the authorities to choose an option on behalf of the service provider. Similar views were upheld in cases like M/s. Nava Bharat Ventures Ltd. and Linkwell Telesystems Pvt Ltd. The Tribunal concluded that the demand under Rule 6 (3) (i) cannot be sustained as the appellant had already reversed the proportionate credit, satisfying the requirements under Rule 6 (1) and 6 (2).

Issue 2: Whether the show cause notice is barred by limitation.

The appellant argued that the figures were available in the accounts and verified by the Range Officer, showing no suppression of facts. The credit availed on common inputs was only Rs.1,25,000/-, and the appellant had reversed Rs.10,91,346/- along with interest. The Tribunal found no evidence of suppression of facts with intent to evade duty and held that the show cause notice invoking the extended period was not sustainable.

Conclusion:

The Tribunal set aside the impugned order, deciding both issues in favor of the appellant. The demand under Rule 6 (3) (i) was not sustained, and the show cause notice was deemed barred by limitation. The appeal was allowed with consequential relief.

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