2018 (12) TMI 428 – CESTAT MUMBAI – TMI – CENVAT Credit – common input and input services used for dutiable and exempted final products – non-maintenance of separate account – Rule 6(3) of CCR – extended period of limitation – Scope of SCN – Held that:- Admittedly reversal of proportionate credit was made much before issue of show-cause notice. Show-cause notice doe not reveal as to how the matter has gone to the knowledge of the department or brought to the notice of the parties but order-in-original at para 2 indicates that during the course of audit, it was noticed that assessee had availed cenvat credit on common inputs and input services which are used in the manufacture of dutiable as well as exempted final products – there is force in the submission of ld. Counsel for the appellant that it had not availed credit of duty paid on common inputs and the dispute is therefore restricted to availment of cenvat credit on common input service.
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Extended period of limitation – Held
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at the higher rate would be applicable to the assessee for which the order passed by the Commissioner confirming 6% liability against proportionate availment of 1.33% credit is not sustainable.
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Appeal allowed – decided in favor of appellant. – Appeal No. E/86191/2018 – A/88054/2018 – Dated:- 6-12-2018 – Dr. Suvendu Kumar Pati, Member (Judicial) Shri Govind P. Pingle, Consultant for the appellant Shri D.S. Chavan, Supdt. (AR) for the respondent ORDER Imposition of duty demand of 6% against availment of common input and input services without maintenance of separate account for dutiable and exempted final products against appellant s voluntary reversal of proportionate credit under Rule 6(3) along with penalty invoking extended jurisdiction is assailed in this appeal. 2. The narrow compass in which the dispute has come up to this Tribunal stage is that appellant company was found to have been availing cenvat credit of duty paid on inputs/ capital goods and service tax paid on input
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appeal, ld. Counsel for the appellant Shri Govind P. Pingle, Consultant submitted that on being pointed out by the department, proportionate credit was reversed under Rule 6(3A) and the sole reason for rejection of the appeal is that appellant had not exercised the option in writing to the departmental Superintendent giving particulars which was required under Rule 6(3)(ii) read with 6(3A) of the Cenvat Credit Rules. Concerning the appellant s contention against allegation of suppression of fact, the adjudicating authority has avoided to comment on the same. He further argued that, as reveals from para 5 of the order-in-original, the appellant had not availed cenvat credit of duty paid on common inputs and the issue is therefore strictly restricted to availment of credit on common input services. In referring to the decision of the Tribunal reported in 2016 (43) STR 411 (T-Hyd.) and 2017 (347) ELT 112 (T-Bang.), Ld. Counsel for the appellant argued that condition in Rule 6(3A) to intim
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and admittedly no separate record was maintained by the appellant for which he justified leviability of duty @ 6% as contemplated in the Cenvat Credit Rules. 5. Heard from both sides, perused the case records and gone through the judicial decisions cited by the appellant. Admittedly reversal of proportionate credit was made much before issue of show-cause notice. Show-cause notice doe not reveal as to how the matter has gone to the knowledge of the department or brought to the notice of the parties but order-in-original at para 2 indicates that during the course of audit, it was noticed that assessee had availed cenvat credit on common inputs and input services which are used in the manufacture of dutiable as well as exempted final products. However, a finding is given in the order-in-original at para 5, the relevant portion of which reads as follows:- In this regard the assessee s submission that they have not availed cenvat credit on inputs of exempted goods i.e. Bicycle valve appea
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essed the material fact that they have availed cenvat credit on common input services which was noticed only during audit, for which extended period of limitation as envisaged in proviso to Section 11A(1) prior to 08.04.2001 and Section 11A(4) with effect from 08.04.2001 is justifiably invocable and the demand of 16,65,169/- along with interest and penalty are appropriately imposed. It is found from the Order-in-Appeal that a vague statement at para 17 is made that appellant had availed cenvat credit on raw materials viz. Brass rods, brass stems and rubber components but no such basis is found from its order despite the fact that the appellants contention regarding non-availment of credit on inputs/ raw materials required for manufacture and clearance of final products are noted in para 6 of his order. 7. Now coming to the statutory audit procedure, the purpose of audit, as available in the Manual published by the Institute of Chartered Accountants of India in respect of EA audit and C
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CERA audit party to point out the deficiencies, leakage of revenue and non recoveries of dues by the Central Excise Department. Therefore, it cannot be said that only because audit party had found non-maintenance of separate records appellant is to be tasked for suppression etc. 8. In exercise of option as contemplated in Rule 6(3A), the assessee has to choose either of those options and in view of the judicial precedent set in the above two referred case laws, non-intimation of such exercise of option can only be treated as mere procedural lapse. Further, nowhere in the said procedure it has been mentioned that in the event of such intimation not being given, tax liability at the higher rate would be applicable to the assessee for which the order passed by the Commissioner confirming 6% liability against proportionate availment of 1.33% credit is not sustainable and hence the Order. 9. The Appeal is allowed and the impugned order passed by Commissioner (Appeals) vide Order-in-Appeal
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