Rule 6(3) of CCR inapplicable if wrongly taken credit was reversed subsequently: CESTAT [Read Order]

The Ahmedabad  Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Rule 6(3) of Cenvat Credit Rules is inapplicable if wrongly taken credit was reversed subsequently

The issue involved whether the Adjudicating Authority was right in confirming an amount equivalent to 5%/ 10% of the value of exempted goods when the appellant,  West Coast Pharmaceutical Works had already reversed proportionate Cenvat Credit.

Shri, Amal Dave Counsel appearing on behalf of the appellant submitted that in the appellant’s own case only for a different period on the same issue remanded the matter vide final order no A13152/131153-2017 dated 06-10-2017. He requested that the matter may also be remanded for deciding the matter as per the observation made by this tribunal in their own case. 

 It was argued that when the proportionate credit was reversed the demand of 5%, 10% under Rule 6(3) of Cenvat Credit Rules shall not sustain.

Shri, Tara Prakash, Deputy Commissioner (AR) appearing on behalf of the revenue reiterated the findings of the impugned order he also expressed no objection if the matter is remanded.

A two-member bench comprising Ramesh Nair, member (judicial) and C L  Mahar, Member (Technical) observed that the appellant has complied with the condition prescribed under Rule 6(3)(II) read with sub-rule (3A) of Rule 6 of Cenvat Credit Rules, therefore demand of huge amount of Rs. 24,71,93,529/- of the total value of the vehicle amounting to. Rs. 494,38,70,577/- sold In the market cannot be demanded.

Further viewed that Rule 6 of the Cenvat Credit Rules Is not enacted to extract an Illegal amount from the assessee. The main objective of Rule 6 Is to ensure that the assessee should not avail of the Cenvat Credit in respect of Input or input services which are used in or In relation to the manufacture of the exempted goods or for exempted services.

If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. It was also observed that in either of the three options given in sub-rule (3) of Rule 6, there are no provisions that If the assessee does not opt for any of the options at a particular time, then the option of payment of 5% will automatically be applied.

It was held that “when the appellant have categorically by way of their Intimation opted for option provided under sub-rule (3)(1), how Revenue can Insist that option (3)(i) under Rule 6 should be followed by the assessee”

The CESTAT set aside the impugned order and remanded the matter to the adjudicating authority for passing a fresh de novo adjudication.

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