Non Verification of Correctness of Reversal during Normal Period of Limitation: CESTAT Remands Matter for Fresh Adjudication [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), remanded matter for fresh adjudication on the ground of non-verification of correctness of reversal during normal period of limitation.

The appellant in the present matter is Thermotech Systems Ltd. The two issues for consideration before the Tribunal are:

1. Whether the assessee is liable to pay 10%/5% of the value of the exempted goods. When the common input/ input services were used for both categories of goods that is dutiable as well as exempted goods, in a case where the assessee has reversed the proportionate Cenvat credit on the input/ input service attributed to the exempted goods.
2.  Whether the Commissioner is right in dropping the demand for the extended period.

Amal Dave, Counsel who appeared on behalf of the assessee submitted that on merit the Commissioner confirmed the demand, only on the ground that there is no statutory provision for reversal of proportionate credit in the Cenvat Credit Rules, 2004. Therefore, the reversal cannot be accepted and the only option is to pay 10% /6%/5% amount equal to value of exempted goods. It is a submission that the Adjudicating Authority has completely discarded the settled legal position in this regard.

Anoop Kumar Mudvel, Superintendent (AR), who appeared on behalf of the revenue reiterated the findings of the impugned order.

A Two-Member Bench comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member noted that it was clear that neither separate accounts were being maintained nor payment at the prescribed rate on the value of exempted goods was being made. Thus, this amply makes it clear that the department was indeed in knowledge of the practice followed by the said assessee and hence there was no suppuration of facts on the part of the assessee. Therefore, the demand for the extended period was not sustainable.

The Bench further noted that “In principle it is settled that once the assessee reverses the propionate credit along with interest, if there is any delay in reversal, the demand of 10% /6%/5% of the value of exempted goods shall not be sustainable.”

“However, the adjudicating authority has not verified the correctness of reversal during the normal period of limitation. Therefore, only for the limited purpose of verification of the amount of reversal, during the normal period, assessee’s appeal needs to be remitted back to the Adjudicating authority” the Bench concluded.

To Read the full text of the Order CLICK HERE

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