2026 (1) TMI 18 - AT - Central Excise

Proportionate CENVAT credit reversal on input naphtha for exempted goods u/r 6(3A), amendment benefit upheld; appeal dismissed

The dominant issue was whether proportionate reversal of CENVAT credit on input naphtha used in manufacture of exempted goods satisfied Rule 6(3A) of the ... Utilisation of input naphtha on which CENVAT credit was taken, in the manufacture of dutiable and/or exempted goods during the disputed period - amount that is required to be reversed proportionately by the respondent in terms of Rule 6 (3A) of CCR of 2004 have been fulfilled or not - eligibility for benefit of amendments brought in through the Finance Act, 2010 during the entire disputed period - HELD THAT:- From the order of the Tribunal in DEEPAK FERTILIZERS & PETROCHEMICAL CORP LTD. [2014 (8) TMI 495 - CESTAT MUMBAI], it clearly transpires that reversal of CENVAT credit by the respondents in terms of CENVAT statute had been accepted by the Tribunal and specific directions was given to the original authority, to consider the C.A. certificate to be produced by the respondents, and if such payments were found to be as per law, then directing the adjudicating authority to grant the benefit provided under the Finance Act, 2010 with respect to reversal of credit on inputs used in the manufacture of exempted product. It is found that the dispute in a similar case of Commissioner of Central Excise, Patna Vs. New Swadeshi Sugar Mills [2015 (9) TMI 881 - SUPREME COURT], the Hon’ble Supreme Court had by upholding the decision of the Tribunal have held that the CENVAT credit taken cannot be denied to the assessee on the ground of Rule 6 of 2002 Rules as it only prohibited availability of credit to manufacture of exempted goods specified therein. Accordingly, the Civil Appeal No.2043 of 2006 filed by the department was dismissed. In the present case, even though the respondents have claimed that they had not used naphtha for generating steam and it is only the exothermic steam generated in the chemical reaction that is used in or in relation manufacture of ammonia-fertiliser, being exempt from payment of excise duty, the respondents had paid the requisite proportionate amount of CENVAT credit involved in the manufacture of exempted goods. The impugned order dated 08.10.2015 does not require any interference - the impugned order passed by the learned adjudicating authority is upheld and the appeal filed by the Revenue is dismissed. Issues: (i) Whether the assessee had utilised naphtha (common input) in the manufacture of exempted goods and, if so, whether the proportionate CENVAT credit required to be reversed under Rule 6(3)/(3A) of the CENVAT Credit Rules, 2004 was duly discharged for the disputed period; (ii) Whether the assessee was entitled to the benefit of the retrospective and consequential amendments effected by the Finance Act, 2010 in relation to reversal of CENVAT credit for the disputed period.Issue (i): Whether the proportionate reversal of CENVAT credit attributable to inputs used in manufacture of exempted goods for the disputed period was duly discharged by the assessee.Analysis: The Tribunal had earlier directed verification of the quantum of reversal and production of a certificate from a Chartered Accountant or Cost Accountant. The adjudicating authority accepted a Cost Accountant certificate certifying the reversible CENVAT amount of Rs.13,74,348/- and interest of Rs.7,12,101/- and recorded payments/ challan particulars. The authority also noted that voluntary reversal and payment of interest amounted to admission of contravention of Rule 6(1) but confirmed that the statutory requirements as remanded by the Tribunal were complied with through the certificate and payments.Conclusion: The proportionate reversal of CENVAT credit for the disputed period was duly discharged by the assessee and accepted by the adjudicating authority.Issue (ii): Whether the assessee is entitled to the benefit of the amendments effected by the Finance Act, 2010 (including retrospective effect) for purposes of reversal of CENVAT credit for the disputed period.Analysis: The Finance Act, 2010 retrospectively amended Rule 6 for the period up to 31.03.2008 and provided a procedure (including payment with interest and production of CA/Cost Accountant certificate) for persons opting to avail the amended provisions. The Tribunal had held that where reversal was done (even belatedly) and the assessee produced the requisite certification and discharged interest liability @24% as directed, the benefit under Finance Act, 2010 should be granted subject to verification. The adjudicating authority, on verification of the Cost Accountant certificate and payment evidence, applied the Tribunal's directions and accepted grant of the benefit under Finance Act, 2010 for the relevant period.Conclusion: The assessee is entitled to the benefit of the Finance Act, 2010 amendments for the disputed period, subject to production and acceptance of the CA/Cost Accountant certificate and payment of interest, which were satisfied in the present case.Final Conclusion: The impugned adjudication order that accepted the certified reversal of CENVAT credit and interest and imposed a consequential penalty was properly made in compliance with Tribunal directions; the Revenue's appeal against that order is without merit and is dismissed.Ratio Decidendi: Where an assessee has effected proportionate reversal of CENVAT credit and produces a certified statement from a Chartered Accountant or Cost Accountant together with evidence of payment of interest as required by the Finance Act, 2010 and Tribunal directions, the benefit of the retrospective amendment and the consequent relief under the amended Rule 6 is available and such certified reversal, once verified and accepted by the adjudicating authority, precludes denial of the benefit.