No Verification of Reversal of Credit of Input Service attributed on Exempted Goods: CESTAT orders re adjudication [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ordered re adjudication the ground that no proper verification was done on reversal of credit of input service attributed on exempted goods.

The issue involved in the present case is whether the appellant, Allied Instruments Pvt Ltd is liable to pay 5%/ 10% of the value of exempted goods due to the reason that appellant have not maintained proper separate record of common input service used in the dutiable and exempted final products as per Rule 6 of Cenvat Credit Rules, 2004.

Amal Dave, Counsel appearing on behalf of the appellant, at the outset submits that in respect of Appeal No. E/10463/2015, the appellant has reversed proportionate Cenvat credit and in respect of other appeals, the appellant has not taken credit in respect of inputs attributed to exempted goods and credit was taken only for dutiable goods. Therefore, in all the appeals, the appellant is not required to pay 5% or 10% of the value of exempted goods.

The Coram consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “It has now been settled that if the appellant has not availed Cenvat credit in respect of input service used in exempted goods and if at all the same is availed and subsequently reversed proportionate credit, the assessee is not required to pay 5%/ 10%. However, the Adjudicating Authority has not verified that proportionate reversal of the credit or non availment of credit of input service attributed to the exempted goods.”

“Accordingly, we are of the view that if it is found that the appellant has availed Cenvat credit against input service attributed to the exempted goods and reversed along with interest or Cenvat credit attributed to exempted goods was not availed, the appellant is prima-facie not liable to pay 5%/ 10% of the value of exempted goods.”

Allowing the appeal, the Bench pointed out that all the matters are required to be reconsidered after ascertaining the fact whether the appellant have correctly not taken the credit or reversed the credit in respect of input service attributed to the exempted goods and thereafter pass a reasoned order.

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