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2013 (8) TMI 463 - CESTAT MUMBAIRule 6(3) of Cenvat Credit Rules, 2004 - Appellant did not maintain separate accounts for the input services used in or in relation to the manufacture of product dutiable as well as exempted products - Two options were available to them, i.e., either to pay 5%/10% of value of the exempted goods or pay an amount equal to the credit attributable to the input services used in or in relation to manufacture of exempted goods subject to the provisions of Sub-rule (3A) – When mistake was pointed to the appellant of taking full credit of the input services, he reversed not only the credit taken on input services used in the manufacture of exempted goods but also the credit taken on input services used in the manufacture of dutiable goods. In other words, the appellant reversed the entire credit taken along with interest thereon – Held that:- Rule 6(3) (i) will not have any application, when a credit is taken wrongly and the same is reversed along with interest as it tantamount to non-taking of the credit, relying upon the judgments in the case Hello Minerals Water (P) Ltd [2004 (7) TMI 98 - HIGH COURT OF JUDICATURE AT ALLAHABAD], wherein it is held that “reversal of Modvat credit amount to non-taking of credit on the input and even if such reversal was done after the clearance of the goods the said action amounts to non-availment of credit - In view of this decision along with various other decisions s.a. in the case of Chandrapur Magnet Wires (P) Ltd.[ 1995 (12) TMI 72 - SUPREME COURT OF INDIA], the reversal of credit by the appellant on the entire service tax taken along with interest thereon both in respect of dutiable goods as well as exempted goods amounts to non-availing of credit and, therefore, the provisions of Rule 6(3)(i) are not attracted and the confirmation of demand by the adjudicating authority directing the appellant to pay an amount at the rate of 5%/10% of the value of the exempted goods is not sustainable in law. Consequently, the imposition of penalties on the appellant and appellant firm and its manager are also not sustainable in law and accordingly, they are set aside – Decided in favor of Assessee. Penalty under Rule 15(3) of Cenvat Credit Rules, 2004 – Held that:- Appellant has initially availed credit and only on pointing out by the department they have reversed the credit and, therefore the appellant is liable to penalty under Rule 15(3) of the Cenvat Credit Rules 2004 for contravention of the provisions of Cenvat Credit Rules. The maximum penalty imposable under he said Rule is ₹ 2000/- and accordingly the appellant is liable to pay penalty of ₹ 2000/-.
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