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TaxTMI 
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2017 (9) TMI 1375
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..... 3. Material on record further discloses that from 05/2005 to 03/2006, the first respondent herein, had availed duty credit on 'Furnace Oil', used for generation of steam and subsequently for sterilising I.V. fluid containers, used both dutiable and exempted products. Under Rule 6(2) of the Cenvat Credit Rules, 2004, the 1st respondent/assessee is bound to maintain separate accounts for receipt, consumption and inventory of inputs/input services, in the manufacture of dutiable/exempted goods. The 1st respondent/assessee has failed to maintain separate accounts for such inputs/input services, and consequently, they are bound to pay 10% of the value of the exempted goods cleared, as per Rule 6(3)(b) of the Cenvat Credit Rules, 2004. On the above grounds, the Revenue initiated proceedings for demand of an amount equal to 10% of the value of the exempted goods, in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A (2) of the Central Excise Act, 1944 and for imposing a penalty, under Rule 15 of Cenvat Credit Rules, 2004, for the above period and accordingly an order in Original No.57/2006 dated 19.12.2006 has been passed: " I confirm and demand from M/s.M....
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....mmon Final Order No.879, 880/08, held as follows: 4. After examining the cited case law, we find that the principle applied in those cases is that MODV AT/ CENVAT credit taken and subsequently reversed is as good as not taken. In all cases, the assessees had taken credit on common inputs/input services which were used in the manufacture of dutiable and exempted final products and separate accounts were not maintained in respect of such inputs/input services vis-a-vis the two streams of final products. In all cases, the department demanded 100/0 of the value of the exempted products (less taxes) under Rule 6(3)(b) of the CENVAT Credit Rules, 2004. In all cases, the credit in question was reversed, prior to issuance of show-cause notice in some cases and after issue of show-cause notice in the other. The quasi-judicial authorities of the department confirmed the demand. This Tribunal consistently relied on the ratio of the Supreme Court's judgement in Chandrapur Magnet Wires (P) Ltd Vs Collector of Central Excise Nagpur 1996 (81) E.L.T 3 (S.C.) and the Allahabad High Court's judgement in Hello Minerals Water (P) Ltd. Vs Union of India [2004 (174) E.L.T 422 (AIL)] and held th....
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.... date of receipt of a certified copy of this order. Subject to such payment of interest, we set aside the impugned demand along with penalty and allow the appeal of M/s.MMPL." 7. Being aggrieved, Commissioner of Central Excise, Chennai II Commissionerate, has filed the instant Civil Miscellaneous Appeal on the following substantial questions of law. i) Whether in the facts and circumstances of the case, the Tribunal was right in setting aside the impugned Order In Original even though the appellant had reversed the cenvat credit taken and attributable to the goods cleared free of duty after the removal of goods from the factory when the ratio in the Apex court judgment in Chandrapur Magnet Wires Vs. CCE,Nagpur is in favour of the Board's circular for reversal before removal of exempted goods? ii) Whether the Tribunal is right in setting aside the order of the Appellant herein even though the 1st respondent /assessee has admittedly contravened the mandatory requirement under Rule 6 (2) of the CENVAT Credit Rules, 2004 and consequently liable to pay duty amount as contemplated under Rule 6 (3) (b) of the said Rules. iii) Whether the Tribunal is justified in its order when the....
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....as not reversed the credit taken and attributable to the goods cleared free of duty, before the removal of such goods from the factory; that the Tribunal ought to have taken note of the Board Circular dated 22/8/86 and 10-04-1986, wherein, it has been categorically stated that the credit taken, should be reversed prior to the removal of the goods and such direction has once again, reinforced by the Board's subsequent circulars No.232/6/96-CX dated 25-7-1996 and 737/55/2003-CX dated 28-8-2003. 9. Heard Mr.A.P.Srinivas, learned counsel for the appellant and perused the materials available on record. 10. The Tribunal has found that the entire credit in question has been reversed. On the facts and circumstances of the case, as to whether the Tribunal was right in directing M/s.Mount Mettur Pharmaceuticals Limited, to pay only interest at the appropriate rate, we deem it fit to consider a decision of this court in Commissioner of Central Excise, Chennai - 4 vs. Sundaram Fasteners Limited reported in 2014 (304) ELT 7, wherein, one of the issues, which came up for consideration, before a Hon'ble Division Bench was, whether the assessee therein is liable to pay interest under Rul....
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...., it observed that the High Court in the said case erroneously held that the interest can be claimed from the date of wrongful availment of CENVAT Credit and it should only be payable from the date when CENVAT Credit is wrongly utilized." Though other decisions were relied by the assessee therein, at paragraphs 11 and 12 in Sundaram Fasteners' case, the Hon'ble Division Bench held as hereunder: 11. The one and only decision which concerns about Rule 14 is the decision reported in 2011 (265) ELT 3 (SC), where the Hon'ble Supreme Court in paragraph No.17 has clearly pointed out that on the happening of any of the three situations viz., credit taking credit, utilizing it wrongly or erroneously refunding the credit, becomes recoverable along with interest. In paragraph Nos.16 and 17 of the said Judgment, the Hon'ble Apex Court has observed as follows:- "16.A bare reading of the said Rule would indicate that the manufacturer or the provider of the output service becomes liable to pay interest along with the duty where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded and that in the case of the aforesaid nature of provision of Section ....
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....ks of accounts, reversal of credit, and whether the CESTAT, Madras was right, in setting aside the demand, at paragraph 13, the Hon'ble Division held as follows: "13. The learned counsel for the assessee submitted his notes on the contention that interest being compensatory and that question of payment of interest would arise only where the principal is due. To that contention, by placing reliance on the decision reported in 1996 (88) ELT 12 (SC) (Prathiba Processors vs. Union of India as well as the decision reported in 2007 (215) ELT 3 (CCE v s. Bombay Dyeing), the learned counsel for the assessee contended that, when credit has been reversed before utilization, the same did not amount to taking credit." 12. On the facts and circumstances of the case, on the next question as to whether CESTAT, Madras was right in setting aside demand and penalty, it is worthwhile to consider a decision of the Hon'ble Division Bench in Commissioner of Central Excise, Puducherry vs. CESTAT, Chennai reported in 2015 (323) ELT 323 Madras, wherein, it was the case of the department that the respondent had used the common cenvat credit availed inputs in the manufacture of dutiable aerated wa....
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.... 2004] In the Cenvat Credit Rules, 2004, in Rule 6, after sub-rule (6), the following subrule shall be inserted, namely : "(7) Where a dispute relating to adjustment of credit on inputs or input services used in or in relation to exempted final products relating to the period beginning on the 10th day of September, 2004 and ending with the 31st day of March, 2008 (both days inclusive) is pending on the date on which the Finance Bill, 2010 receives the assent of the President, then, notwithstanding anything contained in sub-rules (1) and (2), and clauses (a) and (b) of sub-rule (3), a manufacturer availing Cenvat credit in respect of any inputs or input services and manufacturing final products which are chargeable to duty and also other final products which are exempted goods, may pay an amount equivalent to Cenvat credit attributable to the inputs or input services used in, or in relation to the manufacture of, exempted goods before or after the clearance of such goods : Provided that the manufacturer shall pay interest at the rate of twenty-four per cent, per annum from the due date till the date of payment of the said amount. 10th day of September, 2004 to the 31st day of Marc....