Demand of 10%/5% on exempted goods unsustainable as proportionate reversal already made

Thermotech Systems Ltd Vs C.C.E (CESTAT Ahmedabad)

CESTAT Ahmedabad held that reversal of proportionate credit towards exempted goods along with interest already made, the demand of 10% /6%/5% of the value of exempted goods shall not be sustainable

Facts- The revenue as well as the assessee has mainly contested that whether the assessee is liable to pay 10%/5% of the value of the exempted goods. When the common input/ input services were used for both categories of goods that is dutiable as well as exempted goods, in a case where the assessee has reversed the proportionate Cenvat credit on the input/ input service attributed to the exempted goods and whether the Commissioner is right in dropping the demand for the extended period.

Conclusion- Held that once the assessee reverse the propionate credit along with interest, if there is any delay in reversal, the demand of 10% /6%/5% of the value of exempted goods shall not be sustainable. However the adjudicating authority has not verified the correctness of reversal during the normal period of limitation. Therefore only for the limited purpose of verification of the amount of reversal, during the normal period, assessee’s appeal needs to be remitted back to the Adjudicating authority.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

1. The revenue as well as the assessee has filed the appeal against the common impugned order, the issue on merit involved in the present case is that:

i) Whether the assessee is liable to pay 10%/5% of the value of the exempted goods. When the common input/ input services were used for both categories of goods that is dutiable as well as exempted goods, in a case where the assessee has reversed the proportionate Cenvat credit on the input/ input service attributed to the exempted goods.

ii) Whether the Commissioner is right in dropping the demand for the extended period.

2. Shri, Amal Dave Learned Counsel appearing on behalf of the assessee submits that on merit the Learned Commissioner confirmed the demand, only on the ground that there is no statutory provision for reversal of proportionate credit in the Cenvat Credit Rules, 2004. Therefore, the reversal cannot be accepted and the only option is to pay 10% /6%/5% amount equal to value of exempted goods. It is a submission that the Adjudicating Authority has completely discarded the settled legal position in this regard. He placed reliance on the following Judgments: