The CESTAT, Ahmedabad bench has held that mere non-filing of declaration cannot be a reason to deny the proportionate reversal of credit under the Cenvat Credit Rules, 2004.
The appellant are engaged in the manufacture of pharmaceutical goods, some of the products are exempted. Initially they have availed the Cenvat Credit in respect of all the common inputs and input services which have been used in the manufacture of dutiable and exempted goods. The appellant subsequently reversed the cenvat credit attributed to the exempted goods on due date.
The department was of the view that since the appellant has not filed a declaration for opting of proportionate reversal of credit, they are required to pay 6% of the value of the exempted goods, accordingly, the differential demand was confirmed.
On appeal, the Commissioner (Appeals) held that the appellant is required to pay 5%/10% on the ground that they have not filed a declaration as required for payment of proportionate credit in terms of Rule 6(3)(A) of Cenvat Credit Rules, 2004.
Judicial Member Mr. Ramesh Nair observed that it is not in dispute that the appellant have admittedly reversed the proportionate credit.
“Therefore, in my view as held by the Hon’ble Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. 1996 (81) ELT 3 (SC), reversal of Cenvat Credit shall amount to non-availment of Cenvat Credit, if this be so, then Rule 6 is not applicable. Alternatively, once, the appellant have reversed the Cenvat Credit proportionately, they have opted for the reversal of proportionate credit then the Revenue cannot insist for some other option which the appellant has not opted for. As regard, non-filing of the declaration, which is only the procedural requirement. Due to lapse of procedural requirement, substantial benefit of proportionate reversal of Cenvat credit cannot be objected to,” the Tribunal observed.
Allowing relief to the appellant, the Tribunal held that “from the details asked for in the declaration, I find that the same is otherwise available with the department, therefore, even if the details were not declared in the prescribed form but the details are otherwise required to be declared in the form are otherwise available with the department, therefore, mere non-filing of declaration cannot be the reason that the appellant’s option for the proportionate reversal is not available. The judgement cited by the appellants are directly applicable to the facts of the present case. Accordingly, I am of the view that the appellant has rightly reversed the proportionate credit. Hence, no further payment can be demanded from the appellant.”
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