Demand of 10%/6%/5% on value of exempted goods not sustained as proportionate cenvat credit reversed

Emami Limited Vs C.C.E & S.T.-Valsad (CESTAT Ahmedabad)

CESTAT Ahmedabad held that appellant is not liable to pay an amount equal to 10%/6%/5% of the value of exempted goods as proportionate Cenvat credit on common input service attributed to the exempted final product already reversed.

Facts- The appellant are engaged in the manufacture of dutiable as well as exempted goods. They are availing Cenvat credit in respect of input and input services. There are certain common services such as management consultant services, Chartered Accountant services, financial and accounting services, etc. are availed by the head office of the appellant, which is attributed to both dutiable and exempted goods. During audit it was observed that the appellant are engaged in the manufacture of dutiable as well as exempted goods from April-2009 to March- 2013 wherein exempted goods to the tune of Rs. 43,02,50,793/- were manufactured and sold.

It was further observed that the appellant had availed the Cenvat credit of input services to the amount of Rs. 56,52,957/- based on invoices issued by its head office as an ISD on services like management consultancy, CA service, etc. which were commonly used for dutiable as well as exempted goods. Thus it was observed that the appellant should reverse Cenvat credit availed on such common input/ input services based on ratio of exempted goods manufactured.

As directed, the appellant in the months of May 2013 and July 2013 reversed the proportionate Cenvat credit of Rs. 30,68,062/- along with payment of interest of Rs. 8,01,333/- thereafter the appellant filed an intimation submitting the payment details for reversal of credit and requesting the commissioner to close the audit objection and not to issue any show cause notice for imposing penalty. However, the department issued a letter dated 19.09.2013 directing the appellants to pay penalty under the provisions of Section 11A (5) for irregular availment of Cenvat credit of common input service for dutiable as well as exempted goods.

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