Payment of 5%/10% of value of exempted goods unjustified as proportionate credit reversed

Ref Cem Industries Vs Commissioner of Central Excise & ST (CESTAT Ahmedabad)

CESTAT Ahmedabad held that demand under Clause (i) of Rule 6(3) i.e. payment of 5%/10% of the value of exempted goods unjustified as appellant rightly availed the option of sub-rule (3A) of Rule 6 of CCR, 2004 i.e. reversal of proportionate cenvat credit attributed to exempted goods.

Facts- The appellant are engaged in the manufacture of branded and unbranded fire bricks. The appellant have been availing benefit of value based exemption under Notification No. 08/2003-CE dated 01.03.2002, as amended. The appellant have also been availing Cenvat credit under Cenvat Credit Rules, 2002 for the relevant period of the demand.

The department is of the view that the appellant has been availing Cenvat credit on inputs namely pet-coke, furnace oil, carbon black and calcined bauxite. These inputs are commonly used in the manufacture of both branded and un-branded fire bricks. The appellant has not maintained separate accounts of input for use in the exempted as well as dutiable final products, as required under Rule 6 of Cenvat Credit Rules, 2004, the appellant thus were asked to pay Central Excise duty at the rate of 8/10% of the value of exempted goods cleared as per the provisions of Rule 6 of the Cenvat Credit Rules, 2004. The matter got adjudicated by impugned order-in-original wherein the Adjudicating Authority has confirmed the demand of Rs. 59,24,415/- u/s. 11A(1) of the Central Excise Act, 1944 and penalty of equal amount of duty has also been imposed u/s. 11AC of Central Excise Act, 1944. The appellant is before us against the above impugned order-in-original.

Conclusion- Held that 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.

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