No Action against Manufacturer of Dutiable Goods on Reversal of Entire Amount of Cenvat Credit except amounts covered by Rule 6(5): CESTAT [Read Order]

The Hyderabad Customs, Excise, and Service Tax Appellate Tribunal has held that no action against the manufacturer of dutiable goods on reversal of entire amount of Cenvat credit except the amounts covered by Rule 6(5).

The Appellant, Linkwell Telesystems Pvt Ltd. manufactures both dutiable and exempted goods, i.e., those on which Central Excise duty is payable and those on which it is not payable. It avails the benefit of CENVAT credit under CENVAT Credit Rules, 2004. Its records for the period 2008-09 to 2010-11 were audited and it was found that the Appellant was maintaining separate records for the inputs which were used for the manufacture of dutiable and exempted goods and took CENVAT Credit only on the inputs which were used in the manufacture of dutiable goods. However, the Appellant had also availed CENVAT credit of Rs. 11,95,077/- on the input services on the basis of the Input Service Distributor invoices issued by its head office in respect of the services received there. This credit was not bifurcated into those which had gone into the dutiable or exempted goods. It was felt by the Revenue that an amount equal to 10% of the value of the exempted goods is payable under Rule 6(3) (i) by the Appellant and a Show Cause Notice demanding an amount of Rs 11,95,39,489/- under Rule 6(3) (i) read with Rule 14 along with interest. The SCN further proposed to impose a penalty under Rule 15.

It was submitted by the revenue that it was required to maintain separate accounts as required under Rule 6(2) or pay an amount under Rule 6(3) and the appellant opted to maintain separate accounts. It has simultaneously also availed CENVAT Credit on the common input services, which is not permissible.

Appellant submitted that after deducting the credit taken on services covered by Rule 6(5) and the credit taken on services when the Appellant was only manufacturing dutiable goods, a credit of Rs.42,460/-  is left which it had reversed along with interest. Therefore, nothing survives in this demand.

The Coram of Honorable Mr. P.K. Choudhary, Member (Judicial) and Honorable Mr. P. Venkata Subba Rao, Member (Technical) giving reliance to the decision of Honorable Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. versus Collector of Central  (12) Appeal No. E/2215/2012 Excise, Nagpur held that “once the credit is debited, it is as good as not taking credit at all. This decision is binding on all quasi-judicial authorities in the country. Therefore, we cannot agree with the learned Commissioner’s finding that even if the bulk of the disputed CENVAT credit is allowable as per Rule 6(5) and even though the remaining CENVAT credit amounting to Rs. 42,760/- has already been reversed by the appellant along with interest, it cannot be considered as not taking ineligible CENVAT credit. Applying the ratio of  Chanderpur Magnets, it must be held that it is as good as the appellant not taking any CENVAT credit at all as soon as it has reversed the credit of Rs. 42,760/-. Thus, the Appellant has completely complied with the requirement under Rule 6(1). Thus, there is no need to go into Rules 6(2) and 6(3)”. In view of the above findings, the appeal is allowed and the impugned order is set aside with consequential relief to the appellant

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.