Department cannot insist to avail particular option under Rule 6

CA URVASHI PORWAL

Brief of the Case

In the case of M/s Mahindra & Mahindra Limited Versus CCE, Jaipur – I, It was held that the Revenue could not insist the appellant to avail a particular option under Rule 6. When the appellant calculated the amount to be reversed and the compliance of conditions prescribed under Rule 6 (3) (ii) readwith Rule (3A) of Rule 6 is claimed, a demand under Rule 6 (3) for an amount equal to a percentage of the exempted goods is not sustainable.

Facts of the Case

The appellants are engaged in the manufacture of tractors liable to Central Excise duty. They were availing Cenvat credit of education cess paid on the inputs used by them in the manufacture of tractors. The tractors manufactured by the appellants are exempted from payment of excise duty vide Notification No. 23/2004-CE dated 09/07/2004. However, a cess of 1/8% adv. is leviable in terms of notification issued under Industries (Development and Regulation) Act, 1951, in respect of tractors having engine capacity of above 1800 CC. Tractors having engine capacity less than 1800 CC are not liable to such cess. Appellants are engaged in manufacture of both type of tractors and were using common inputs without maintaining separate accounts for receipt and consumption of these inputs. Invoking the provisions of Rule 6 (3) (b) of Cenvat Credit Rules, 2004 proceedings were initiated against the appellant to recover 10% of value of the exempted tractors. The Original Authority vide the impugned order confirmed a demand of Rs. 2,68,25,330/- and imposed a penalty of an equivalent amount on the appellants. Aggrieved by the said order, the appellants filed this appeal.

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