Reversal of Cenvat Credit on Trading of Exempted Goods: CESTAT Remands matter for Verification [Read Order]

The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) remanded the file for verification of Cenvat Credit on Trading Activities.

According to the department, the assessee had violated Rule 6(3) of the Cenvat Credit Rules, 2004, since they failed to keep separate records of the capital goods, input services, and inputs used in the manufacturing of both exempted and excisable items.

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The assessee, M/s Supreme & Company Private Limited, was engaged in the manufacture of trading activities.

The department observed that they were not maintaining separate accounts of input/input services and that according to Rule 6 (3) of the Cenvat Credit Rules, 2004, the assessee is required to pay 5%/6% of the value of the exempted goods. The adjudicating authority imposed a demand on the same.

When the assessee appealed before the adjudicating authority, a part of the demand was dropped, and thus the revenue appealed before the CESTAT.

When the case was called for hearing in the tribunal, nobody appeared on behalf of the assessee.

In this case, the assessee’s claim was that they had reversed the proportionate cenvat credit attributable to the trading activities and were not liable to pay any amount equal to 5%/6% of the value of the exempted goods.

The CESTAT took into account the contention raised by the assessee and set aside the impugned order, and the matter was remanded back to the adjudicating authority. 

The bench directed the adjudicating authority to ascertain whether the assessee had reversed the proportionate cenvat credit attributable to their exempted goods or not.

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The CESTAT held that the assessee is responsible for paying the appropriate CENVAT credit related to the exempted products or trade activities, together with interest if it hasn't been paid yet, and if it is paid, the adjudicating body will confirm whether the assessee is liable for the whole amount due to the reversal of the CENVAT credit.

The order passed by the bench of Ashok Jindal ( Judicial Member ) and Rajeev Tandon ( Technical Member ) also stated that the adjudicating body must provide the assessee a chance to be heard and issue a suitable order in compliance with the law within 60 days after receiving this order.

To Read the full text of the Order CLICK HERE

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