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:
2.1 He further submits that as regard the Revenue’s appeal, the Adjudicating authority has dropped the demand on ground of time bar. Consideration the fact that there was audit from time to time and in every audit this issue has been raised about manufacture or dutiable and exempted goods. The assessees have been declaring the availment of credit and proportionate reversal in their ER-1 return. Therefore, considering this fact that the assessee has not suppressed any fact, the commissioner has rightly dropped the demand on time bar. Accordingly, the Revenue’s appeal is not sustainable.
3. Shri, Anoop Kumar Mudvel, Learned Superintendent (AR) appearing on behalf of the revenue reiterates the findings of the impugned order.
4. First we take up the Revenue’s appeal, wherein the only issue involved is that demand of 10% /6%/5% equal to the value of the exempted goods is time bar or otherwise.
4.1 We find that the Adjudicating authority while dropping the demand on time bar, given the following findings:
“37. Now, I come to the allegation about suppression of facts made in the show cause notice which is very vital in the case. By alleging the suppression of facts, the extended period covering five years was invoked and the show cause notice was issued. At the outset, I find that there is merit in the case of the said assessee so far as the issue of suppression of facts in the case is concerned. The record presented before me shows that the issue about the non- maintenance of records was first raised in the Final Audit Report No. 13/2006 dated 06.04.2004 covering the audit period April, 2000 to March, 2005 in the form of procedural para. This in other words mean that the department had knowledge about it as early as in the year 2004. The subsequent audit report covering the period April, 2005 to 31.05.2007 was more forth coming on the issue. The Final Audit Report No. 86/2007 dated 21.08.2007 dated 26.09.2007 did raise the issue in the form of objection no. 4 wherein the department’s conclusion, about the objection, was shown as not accepted” though the said assessee had paid some amount as per the formula drawn by them and the range officer was also asked to issue show cause notice, if required. The next final audit report bearing no. 56/2011-12 covering the period from June, 2007 to May, 2010 does not raise any objection in this regard. However, as per my findings in foregoing para it was clear that neither separate accounts were being maintained nor payment at the prescribed rate on the value of exempted goods was being made. Thus, this amply makes it clear that the department was indeed in knowledge of the practice followed by the said assessee. The icing on the cake for the said assessee is also a letter dated 17.08.2010 issued from F.No. VI/1(b) 117/A/2010-11 issued by the Audit Officer asking the said assessee to pay amount as per a certain ratio worked out. The relevant portion of the same reads as under:
“You are manufacturing dutible goods as well as exempted goods and maintained separate accounts for inputs used in dutiable and exempted goods as per Rule 6(2) of Cenvat Credit Rules, 2004. On verification of records, financial accounts and ER-1 returns, it was noticed that in the year 2008-09 the total clearance value was Rs. 16,70,09,325/- Out of the same the value of dutiable clearance I value was Rs. 10,85,82,425/- and the value of exempted goods was Rs. 5,11,26,900/- The total purchase value (commercial) of the inputs (excisable raw material) consumed for the said year is Rs. 9,73,76,163-Involving Cenvat credit of Rs 1,17,55,453- Out of the same, the value for inputs consumed for the dutiable goods was Rs.7,14,06,692/- involving central excise duty of Rs. 88,24,098/- and the value for inputs consumed for exempted goods was Rs. 2,59,69471% involving central excise duty of Rs. 29,31,355/- The percentage of Exempted goods and dutiable goods of total sales is 32.43% & 67.57%. Accordingly, the Cenvat credit required to be taken on raw material consumption for dutiable and exempted goods should have been Rs. 38,12,2,93/- (ie. 32.43%) of total available Cenvat credit of Rs. 1,17,55,4534) and Rs 79,43,160/- (e.67.57% of total available Cenvat credit of Rs. 1,17,55,453/-) respectively but you have taken Cenvat credit of Rs. 88,24,098/ instead of Rs. 79,43,160/- on raw material consumption used in the dutiable goods. Hence you have taken more Cenvat credit of Rs. 8,80,938 (Le Rs.88,23,098/- Rs. 70,43,160/= Rs 8,80,938/-) Hence you are required to pay the central excise duty of Rs. 8,80,938/- alongwith appropriate interest.”
Its further noticed that the letter dated 17 08 2010 referred above was not endorsed by the auditor either to Division Office of the Range Office. Also its not clear from the available record that the said assessee has complied with payment of amount of Rs. 8,80,938/-. Further, I find that though the ratio worked out does not have any legal backing when seen through the prism of Rule 6 of Cenvat Credit Rules, 2004, it does not effect in any manner to the fact that the department was in knowledge of the practice followed by the said assessee. I, therefore, find that the extended period cannot be invoked in the facts and circumstances of the case before me. The demand has to be confined to the normal period of one year. Since the show cause notice was issued on 28.05.2014 and served to the said assessee on 29.05.2014, the period of demand under normal period covered would be applicable to the clearance of exempted goods starting from the month of May, 2013 as ER-1 for the same was filed in June, 2013. In the instant case, the show cause notice was issued for the period upto March, 2014. Hence, I find that the demand shall be confined to the period for the clearances made from May, 2013 to March, 2014.”
From the above findings of the Learned Commissioner, it is absolutely clear that the there was no suppuration of facts on the part of the assessee. Therefore, the demand for the extended period was not sustainable. Hence same was rightly set aside by the Adjudicating Authority.
4.2 As regard the appeal of the assessee there is a confirmation of demand of Rs. 4,05,120/-. This demand was confirmed on merit by the Learned Commissioner, on the ground that there is no statutory provision for such reversal of proportionate credit, the only option for the assessee is to pay 5%/6%/10% of the value of the exempted goods. This contention of the Adjudicating authority is absolutely incorrect for the reason that even though there is no exclusive provision for such reversal but there are catena of case laws. Wherein, the issue has been decided in favour of assessees. Wherever, there is proportionate reversal of credit along with interest, if any required. This was consistently held on the pretext that reversal of credit along with payment of interest, would create a situation as if no Cenvat credit was availed and on that basis the provision of Rule 6(3) whereby the amount of 5%/6%/10% is payable shall not apply. This issue has been considered in the following judgments:
a) In the case of Surya vistacom Pvt. Ltd (Supra) Hon’ble CALCUTTA HIGH COURT has passed the following judgment:
“13. As pointed out in the aforementioned decision, if according to the adjudicating authority, the assessee did not abide by the provisions of Rule 6(3) of the Rules, it was open to the adjudicating authority to reject the assessee’s claim as regards the disputed Cenvat credit and it could not mechanically invoke 6% Rule on the assessee. That apart, the Tribunal also, on facts, noted that the department mechanically applied 6% of the entire balance-sheet turnover of the assessee without detailing as to why the said turnover has been taken and why not the value of trading that is provided in Rules, namely, the difference between the sale price and the cost of goods sold or 10% of the cost of goods sold whichever is more in terms of Explanation 1 as contained in Rule 6(3A). This factual finding could not be dislodged by the revenue before us and we agree with the Tribunal on the said aspect. That apart, as pointed out by the Learned Advocate appearing for the respondent/assessee, a new rule has been introduced namely, sub-rule (3aa) in Rule 6 which came into force w.e.f. 1st March, 2016 which states that where a manufacturer or provider of output services has failed to exercise the above, under sub-rule (3) and follow the procedure provided under sub-rule 3(a), the Central Excise Officer, competent to adjudicate the case, based on amount of Cenvat credit involved, may allow such manufacturer or provider or output service to follow the procedure and pay the amount referred to in Clause 2(i) of sub-rule (3) with interest calculated at the rate of 15% per annum from the date of payment of amount for each of the months till the date of payment thereof. The adjudicating authority has not invoked the said rule. That apart, what is important to note is that the amount of legible Cenvat credit to the assessee was Rs. 41,17,269/- whereas the demand which was impugned before the Tribunal fastened a liability of Rs. 3,29,07,268/- which is not legally sustainable.”
b) In the case of Welspun Corp. Ltd (Supra) this Tribunal has passed following decision:
6. We have carefully considered the submissions made by both the sides and perused the records. The limited issue to be decided by us is that in a case where at the time of receipt of input services, the appellant availed Cenvat credit on the entire service and on pointing out by the audit party they reversed the Cenvat credit in respect of input services attributed to the exempted goods/non-excisable goods along with interest, whether the demand confirmed by the Revenue under Rule 6(3) i.e. 5%/10% on value of exempted goods is legal and proper. The appellant is not disputing that the Cenvat credit in respect of input services attributed to exempted goods namely Steam, Fly-Ash and non-excisable goods i.e. electricity sold outside their factory, is not admissible and they have admittedly reversed the proportionate Cenvat credit and also paid the interest from the date of taking credit till the date of reversal. For ease of reference, we reproduce below the Rule 6(3) of Cenvat Credit Rules, 2004 :
(3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely :-
(i) the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six per cent. of value of the exempted services; or
(ii) the manufacturer of goods or the provider of output service shall pay an amount equivalent to the Cenvat credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A).
Explanation I. – If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year.
Explanation II. – For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service.
From the plain reading of the Rule 6(3), it can be seen that the law provided three options to the assessee (I), (II) accordingly the assessee has option either to pay 5%/10% of value of exempted goods or pay an amount determined under sub-rule (3A) i.e. proportionate credit attributed to the exempted goods. The appellant rightly availed the option of sub-rule (3A) of Rule 6 of CCR, 2004, the only lapse on the part of the appellant is that the payment of Cenvat credit was made belatedly, however the appellant have paid interest for the period right from availing the Cenvat credit till the payment/reversal of proportionate Cenvat credit which create a position as if the appellant have not availed Cenvat credit right from the date when Cenvat credit was availed. Therefore there is no reason for imposing option under Clause (i) of Rule 6(3) i.e. payment of 5%/10% of the value of exempted goods. This issue has been considered by this Tribunal time and again, though the appellant have relied upon almost 20 judgments on this issue which are directly applicable. However, we are referring some of the judgments as under :
“5. The Hon’ble Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. v. CCE, Nagpur – 1996 (81) E.L.T. 3 (S.C.) which has been followed in many other decisions of the High Court as well as the Tribunal has held that once Cenvat credit is reversed, it is to be considered ab initio not availed. In the light of this judgment of the Hon’ble Supreme Court, the reversal of Cenvat credit already made by the appellant is to be considered as not taken ab initio.
The Government has introduced the facility of proportionate reversal w.e.f. 14-2008 to mitigate the difficulties faced by manufacturers to maintain separate accounts for inputs/input services as well as when the same are commonly used for dutiable as well as exempted products/services. Though detailed procedure starting with an option to be exercised by manufacturer has been prescribed, in the present case, the appellant has not followed the same. However, it is on record that they have already reversed an amount claimed to be proportionate. It is also pertinent to record that this has been done by the appellant even before the issue of the show cause notice in this case. We are of the considered view that the failure of the appellant to follow the procedure perfectly should not come in the way of extending the substantial benefit of proportionate reversal. However, we find that in the order passed by the lower authority, he has not given any finding as to whether the reversal already made satisfies the test of proportionate reversal in terms of quantum of reversal. Hence, we are of the considered opinion that the matter is to be remanded to the original adjudicating authority to verify whether the amount of Cenvat credit already reversed along with interest satisfies the requirement of proportionate reversal. We also make it clear that there is no justification for demand of the amount equivalent to 10%/5% of the value of electricity wheeled out. The appellant should be given an opportunity to argue their case before the original adjudicating authority who is directed to pass order expeditiously within a period of three months of the date of receipt of this order.”
“7.3 We find that the ratio of the above case laws is squarely applicable to the appellant’s case. We, therefore, hold that if Cenvat credit attributable to inputs used in the manufacture of exempted final products is reversed along with interest subsequent to removal of exempted final products, then the appellant cannot be said to have taken credit of inputs used in or in relation to the manufacture of exempted final products, and they need not pay an amount @ 8% or 10% of the sale price of exempted final products. The adjudicating authority has worked out the demand of Rs. 88,41,543/- on the basis of 8% or 10% of the sale price of exempted final products cleared by the appellant during the material period, while the respondent claims that the input credit attributable to manufacture of exempted final products is only Rs. 7,85,573/-, which they have reversed. In the present case we observed from the case records that the appellant has furnished relevant data/documents available at pages 372 to 396 of the appeal papers filed in Appeal No. E/449/2011 showing Cenvat credit reversed/required to be reversed on inputs used in the manufacture of exempted final products during the material period. The appellant has also placed on record copies of 21 invoices at pages 349 to 370 of the appeal papers of Appeal No. E/449/2011 showing receipt of exempted input (Alpha Beta Arteether) of value of about three crore rupees during the material period, for which no Cenvat credit could be taken. In view of these facts on record, we find that the method adopted by the adjudicating authority for working out of the demand of Rs. 88,41,543/-, on the basis of 8% or 10% of the sale price of dutiable and exempted final products, is not maintainable. We, therefore, remand the matter to the adjudicating authority for proper verification of appellant’s claim of reversal of Cenvat credit on inputs attributable to manufacture of exempted final products on the basis of appellant’s records after affording opportunity to the appellant to explain their case before deciding the issue of quantum of Cenvat credit in remand proceedings.”
“8. There is no merit in this civil appeal. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product, namely, grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No. 14/2002-C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming Cenvat credit before claiming exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made before the stage of exemption. Similarly, on payment of duty on the input (yarn) the assessee got the credit which was never utilized. That before utilization, the entry has been reversed which amounts to not taking credit. Hence, in this case, both the conditions are satisfied. Hence item no. 1 of the table to Notification No. 14/2002-C.E. would apply and accordingly the grey fabrics would attract nil rate of duty.”
“The above Rule 6(3A) states that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing the department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing his exercise of option. The contention of the department is that when the appellant has not intimated his option in writing then the appellant is bound to pay the duty amount calculated under the first option. I am afraid I cannot endorse this contention. The said rule does not say that on failure to intimate, the manufacturer/service provider would lose his choice to avail second option of reversing the proportionate credit. Rule 6(3A), as seen expressly stated is nothing but a procedure contemplated for application of Rule 6(3). Therefore, the argument of the Revenue that the requirement to intimate the department about the option exercised, is mandatory and that on failure, the appellant has no other option but to accept and comply Rule 6(3)(i) and make payment of 5%/10% of sale price of exempted goods/value of exempted services is not acceptable or convincing. The Rule does not lay down any such restriction. The procedure and conditions laid in Rule 6(3A) is intended to make Rule 6(3) workable and not to take away the option available to the assessee. In any case, at no stretch of imagination can it be said that on failure to intimate the department, Rule 6(3)(i) would automatically come into application.”
“4.1 On analysis of Rule 6(3A), I find that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing to the Department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing the exercise of his option. The argument of the Department is that when the appellant has not intimated his option in writing then the appellant is bound to pay the duty amount calculating under the first option. According to me, this argument is devoid of merit, because the said Rule does not say anywhere that on failure to intimate, the manufacturer/service provider would lose his right to avail second option of reversing the proportionate credit. Sub-rule (3A) of Rule 6 is only a procedure contemplated for application of Rule 6(3). Consequently, the argument of Revenue is that the appellants exercising option is mandatory and on its failure, the appellant has no other option but to accept and apply Rule 6(3)(i) and make payment of 5%/10% of the sale price of the exempted goods or exempted services is not acceptable, because the Rule does not lay down any such restriction and this has been held in the judgments cited supra. It has been held in the judgment cited supra that the condition in Rule 6(3A) to intimate the Department is only a procedural one and that such procedural lapse is condonable and denial of substantive right on such procedural failure is unjustified. Therefore, keeping in view the facts and evidence on record, the demand raised by the Revenue is not legal and proper. Moreover, the demand raised by the Revenue is also hit by limitation as the appellant reversed the pro rata credit with interest on 31-7-2010 itself and communicated to the Department whereas the show cause notice was issued only on 13-3-2012 which is beyond the period of one year and the allegation of the Department regarding suppression of fact is also not tenable because the appellant has disclosed these facts in their periodical ER1 returns filed by them. Therefore, the impugned order is not sustainable on merit as well as on limitation and therefore, I set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any.”
7. In view of the above, the issue is no longer res integra, therefore, the demand confirmed equal to 5%/10% of value of the exempted goods is not sustainable. As regard the submission of Ld. Counsel regarding the limitation, we find that firstly, the appellant had not utilized the Cenvat credit attributed to the exempted goods, secondly the fact regarding the availment of credit and manufacture and clearance of exempted and non-excisable goods are very much on record, therefore, the suppression of fact cannot be attributed on the part of the appellant. We also find that since the issue regarding reversal of Cenvat credit under Rule 6(3) is contentious and various cases on the same issue have been made out which can be seen from such of judgment given above, therefore, on the issue related to Rule 6(3) particularly in the facts of the present case it cannot be said that the appellant had mala fide intention to evade payment of duty. Therefore, demand for the extended period is also hit by limitation for the same reason the penalties imposed are also unsustainable.
8. As per our above discussion, we hold that proportionate credit paid by the appellant along with interest is sufficient compliance under Rule 6(3), accordingly the same is maintained. The demand under Rule 6(3)(i) i.e. 5%/10% of value of the exempted goods and all the penalties are set aside. The appeal is allowed in the above terms. “
c) In the case of Maize products (Supra) the Hon’ble Gujarat High Court has passed the following decision:
“3. The brief facts necessary for the present are that the respondent-Company manufactures certain dutiable products narrated in paragraph No. 3(a) of the impugned order of the Tribunal. In the course of manufacturing process, two inputs, namely, Caustic Soda Lye and Hydrochloric Acid are used, resulting in manufacture of both dutiable and non-dutiable products. The Revenue took a view that no duty was payable on some of the final products and hence, duty at the rate of 8% of the value of such final products was required to be paid and CENVAT credit was wrongly availed of. Four show cause notices relating to an exempted product and nine show cause notices relating to bye-products were issued, the period being from April 2000 to March 2004. The four show cause notices were dropped by the Commissioner himself, while in case of nine show cause notices, the proposal to levy duty was confirmed. The matter was carried in appeal before the Tribunal.
4. After hearing the parties, the Tribunal has issued the following directions.
“(6) We have carefully considered the submissions. We are convinced that the demand is highly disproportionate to the credit availed on the common inputs which could be attributed to goods which have been cleared without payment of duty. We are not going to the merits of the decision of the Commissioner in so far as the same relates to dropping of the demand in the four show cause notices as the Department is not in appeal before us. We are inclined to accept the offer of the appellant-company to reverse the entire credit attributable to the exempted product covered in the nine show cause notices and accordingly we set aside the order of the Commissioner confirming the demand in respect of the nine show cause notices with the direction to consider and accept their offer to reverse the entire credit on the common inputs i.e. caustic soda lye and hydrochloric acid. The department shall redetermine the credit taken on the common inputs i.e., caustic soda lye and hydrochloric acid in so far as they relate to demand proposed in the 9 show cause notices. The assessee shall produce the necessary evidence in the form of chartered accountant’s certificate for the relevant period. If any further credit is to be reversed, the same shall be reversed within four weeks from the date of receipt of the communication from the department.”
5. The appellant has produced relevant extracts from the relevant Rule of Cenvat Credit Rules, 2002 which relates to obligation of manufacturer of dutiable and exempted products. Under sub-rule (2) of the said Rules, a manufacturer is required to maintain separate accounts regarding inputs used for manufacturing of dutiable products and inputs used for manufacturing of exempted products. However, sub-rule (3) stipulates that, in a case where the manufacturer opts not to maintain separate accounts, the manufacturer shall follow either condition (a) or condition (b), as the case may be. Under the Rule, Explanation-I provides that the amount mentioned in any of the conditions shall be paid by the manufacturer by debiting the Cenvat credit or otherwise.
6. Thus, in effect, the directions issued by the Tribunal are merely in consonance with the requirement of the relevant rule, and it is not possible to state that the Tribunal has committed any error in issuing such directions. The respondent-assessee having accepted before the Tribunal to reverse the Cenvat credit as recorded by the Tribunal in paragraph No. 4 of the impugned order as regards reversal of the amount involved and any more amount that may be reversible, the Tribunal has issued directions accordingly.
7. In fact, the directions of the Tribunal primarily go to show that the direction was to re-determine the credit taken on common inputs and accept the offer to reverse such entire credit on common inputs insofar as they relate to demand proposed in the nine show cause notices. The Tribunal has also recorded the undertaking given by the respondent-assessee that if any further credit is to be reversed, the same shall be reversed within four weeks from the date of receipt of the communication from the Department. Hence, in the facts and circumstances of the case, it is apparent that the entire controversy has been decided by the Tribunal by merely remitting the matter back to the Adjudicating Authority to redetermine the credit in accordance with law. If any reversal has been made by the respondent-assessee, the same is subject to verification and adjustment if ultimately any further amount is found reversible.
8. According to the respondent-assessee, the exercise directed by the Tribunal has been carried out as recorded in order dated 2-4-2007, which statement is disputed by the learned advocate for the appellant.
9. In the circumstances, in absence of any question of law, as proposed or otherwise, much less a substantial question of law, the appeal is dismissed.”
d) In the case of Maan Pharmaceuticals (supra) the Hon’ble High Court passed the following decision
“5. Mr. Ravani, learned Senior Standing Counsel has reiterated the reasoning adopted by the adjudicating authority and has submitted that in the light of the provisions of Rule 6 of the Cenvat Credit Rules, 2002, it was incumbent upon the assessee to either maintain separate accounts or pay duty at the rate of 8% in case it did not opt to maintain separate accounts.
6. On the other hand, Mr. Paresh Dave, learned advocate for the respondent has invited attention to the fact that the Tribunal has placed reliance upon the decision of the Tribunal in the case of M/s. Chandrapur Magnet Wires Ltd., (supra) as well as a decision of this High Court in the case of M/s. Maize Products v. CCE-II, Ahmedabad, 2007 (79) RLT 662. It is pointed out that against the decision of the Tribunal in M/s. Maize Products, revenue had preferred appeal before this Court which came to be dismissed by the High Court in the case of Commissioner of Central Excise, Ahmedabad-II v. Maize Products, 2009 (234) E.L.T. 431 (Guj.). It was submitted that the decision of the Tribunal being in consonance with the principles enunciated by this Court as well as the Supreme Court in the above referred decisions, no case is made out to warrant any interference.
7. As can be seen from the impugned order of the Tribunal, the Tribunal has merely followed the decision of the Supreme Court in the case of M/s. Chandrapur Magnet Wires Ltd. (supra), as well as a decision of the jurisdictional High Court in the case of M/s. Maize Products (supra). In the case of Commissioner of Central Excise v. Maize Products, this Court has held as follows :-
“5. The appellant has produced relevant extracts from the relevant Rule of Cenvat Credit Rules, 2002 which relates to obligation of manufacturer of dutiable and exempted products. Under sub-rule (2) of the said Rules, a manufacturer is required to maintain separate accounts regarding inputs used for manufacturing of dutiable products and inputs used for manufacturing of exempted products. However, sub-rule (3) stipulates that, in a case where the manufacturer opts not to maintain separate accounts, the manufacturer shall follow either condition (a) or condition (b), as the case may be. Under the Rule, Explanation-1 provides that the amount mentioned in any of the conditions shall be paid by the manufacturer by debiting the Cenvat credit or otherwise.
6. Thus, in effect, the directions issued by the Tribunal are merely in consonance with the requirement of the relevant rule, and it is not possible to state that the Tribunal has committed any error in issuing such directions. The respondent assessee having accepted before the Tribunal to reverse the Cenvat credit as recorded by the Tribunal in paragraph No. 4 of the impugned order as regards reversal of the amount involved and any more amount that may be reversible, the Tribunal has issued directions accordingly.”
8. Examining the impugned order of the Tribunal in the light of the aforesaid decision of this Court, it is not possible to state that the Tribunal has committed any legal infirmity so as to warrant interference. In the circumstances, no question of law, much less, a substantial question of law can be stated to arise out of the impugned order of the Tribunal. The appeal is accordingly dismissed.”
4.3 In view of the above decisions, in principal it is settled 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.
5. As per our above discussion and findings, Revenue’s appeal is dismissed. Assessee’s appeal is remanded to the adjudicating authority, for passing a de-novo order.
(Pronounced in the open court on 24.08.2023)