The Chennai in the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) remanded the matter regarding the allegation on the amount reversed by Lotte India on Processed milk under reversal of proportionate credit to the adjudicating authority.
The appellants are engaged in the manufacture of sugar confectionaries not containing cocoa and bubble gum falling under Chapter Heading 17 of the First Schedule of CETA 1975. The appellants are availing the facility of cenvat credit of duty paid on inputs, capital goods and input services in terms of Cenvat Credit Rules, 2004.
During the manufacture of final products, they also manufactured processed milk, which is an exempted product. The said product viz. processed milk is either consumed captively for the manufacture of sugar-boiled confectionery or sent outside to their sub-contractor units for use in the manufacture of finished products. The Department was of the view that as the appellant is clearing both dutiable finished products as well as exempted products ( processed milk ) they are liable to maintain separate accounts as required under sub-rule (2) of Rule 6 of CCR 2004.
The appellant had reversed the credit of Rs.2,38,839/- being the credit attributable to the input services used for the manufacture of intermediate exempted product viz. processed milk as per Rule 6 (3A) of CCR 2004. The Department was of the view that the said payment made by the appellant is not under law and the appellant has to pay an amount equal to 5% / 6% of the value of exempted goods cleared by them during the disputed period as under Rule 6 (3) (i) of CCR 2004.
A show cause notice was issued for the period January 2010 to February 2013 proposing to demand the irregularly availed credit on exempted goods, along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, and interest and imposed penalties Chennai in the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ).
The appellant argued that even if it is assumed that the appellant has to comply with sub-rule (2) of Rule 6, the appellant having reversed the proportionate credit attributable to input services used in the manufacture of exempted goods ( processed milk ), the department cannot demand 5% / 6% of the value of exempted goods as under Rule 6 (3) (i). Admittedly, the appellant has not used any inputs for the manufacture of processed milk and has used only input services. The adjudicating authority discussed that the appellant has not reversed the correct amount. However, it was held by the adjudicating authority that the short-paid amount in respect of credit attributable to the exempted goods would only be Rs.25,43,387/-.
The Counsel submitted that the matter may be remanded to the adjudicating authority to verify the amount that is required to be reversed by the appellant as per rule 6 (3) (ii) of CCR 2004.
A two-member bench comprising Ms Sulekha Beevi C S, Member ( Judicial ) and Mr Vasa Seshagiri Rao, Member ( Technical ) viewed that the said issue as to whether the appellant has reversed the correct amount requires verification by the adjudicating authority. The demand raised for paying 5% / 6% of the value of the exempted goods as per Rule 6 (3) (i) cannot be sustained, as the appellant has exercised the option by reversing some amount of credit.
The CESTAT left open the issue of limitation to be considered afresh by the adjudicating authority. Mr. M.N. Bharathi appeared for the Appellant and Mr. M. Selvakumar, Assistant Commissioner appeared for the Respondent.
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