CESTAT allows CENVAT credit appeal remand for trading activities without separate accounts for dutiable exempted services

CESTAT Bangalore allowed the appeal by remand in a CENVAT credit dispute involving trading activities from July 2014 to June 2017. The appellant traded goods and availed common input services without maintaining separate accounts for dutiable and exempted services. The tribunal held that Rule 6(3A) of CCR 2004 provides taxpayers the option to reverse proportionate credit with interest when common credit is availed on both dutiable and exempted goods/services. The revenue cannot deny this statutory option to the appellant. The matter was remanded to verify whether the appellant had reversed the entire proportionate credit along with 15% interest as required under the rules.

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Issues Involved:
1. Whether the appellant is liable to pay an amount equivalent to 6% or 7% of the value of exempted services u/s Rule 6(3)(i) of the CCR, 2004.
2. Whether the appellant's compliance with Rule 6(3A) of the CCR, 2004 by reversing proportionate credit is sufficient.
3. Whether the penalty and interest imposed u/s 11AC of the Central Excise Act, 1944 are justified.

Summary:

Issue 1: Liability to Pay Amount Equivalent to 6% or 7% of Exempted Services
The appellant, M/s. Suvikram Plastex Private Limited, manufactures excisable goods and also trades goods. The audit revealed that the appellant availed common input services without maintaining separate inventory for taxable and exempted services, necessitating payment of 6% or 7% of the value of the exempted services u/s Rule 6(3)(i) of the CCR, 2004. The authorities demanded Rs.59,62,525/- for the period from July 2014 to June 2017, along with interest and equivalent penalty u/s 11AC of the Central Excise Act, 1944.

Issue 2: Compliance with Rule 6(3A) of the CCR, 2004
The appellant contended that they complied with Rule 6(3A) of the CCR, 2004 by reversing proportionate credit of Rs.1,76,305/- before adjudication. They argued that the order is contrary to the relevant provisions and lacks jurisdiction. The Tribunal noted that the appellant does not regularly trade but only in exceptional cases, and all clearances are recorded in statutory records. The Tribunal referenced the Hon'ble High Court of Telangana and Andhra Pradesh in the case of Tiara Advertising vs. Union of India and the case of Commissioner of Central Excise and Service Tax vs. Rajasthan Prime Steel Processing Centre Private Ltd., which support the appellant's stance that proportionate reversal of credit is sufficient.

Issue 3: Justification of Penalty and Interest
The Tribunal observed that there is no evidence of intention to evade duty, thus invoking the extended period and imposing a penalty is unsustainable. The Tribunal referenced the case of Goenka Pvt. Ltd. vs. Commissioner of Central Goods and Service Tax, New Delhi, which supports the appellant's claim.

Conclusion:
The Tribunal concluded that the appellant should be allowed the benefit of proportionate reversal of CENVAT credit. The impugned order was set aside, and the appeal was allowed by way of remand for verification of payment/reversal of the proportional CENVAT credit along with interest.

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