2012 (9) TMI 919 - AT - Central Excise

Exemption under Notification No. 6/2006-C.E. dated 1-3-2006 - Non maintenance of separate account - Held that - In respect of supplies made by a manufacturer against international competitive bidding by availing full exemption under Notification No. 6/2006-C.E. (Sl. No. 91) the provisions of sub-rules (1) (2) and (3) of Rule 6 are not applicable in view of the provisions of sub-rule (6) of Rule 6. When the appellant had wrongly paid the amount under Rule 6(3) of the Cenvat Credit Rules and had requested the Department for its recredit and thereafter had reminded the Department for the recredit and when in pursuance of their request for recredit the same had been allowed by the Assistant Commissioner vide order dated 20-4-2009 just because the appellant had taken the recredit on their own on 31-3-2009 there would be no justification for imposition of penalty. When the Assistant Commissioner vide order dated 20-4-2009 had permitted the recredit of Rs. 9, 80, 354/- this credit would be treated as available for the month of March 2009 and hence there would be no excess utilization of credit during that month. In view of this the cenvat credit demand and penalty does not appear to be sustainable - Stay granted.

Summary

Issues:
1. Interpretation of Rule 6 of the Cenvat Credit Rules, 2004 regarding duty exemption under Notification No. 6/2006-C.E.
2. Imposition of penalty for taking suo motu credit and alleged excess utilization of Cenvat credit.

Analysis:

Issue 1: Interpretation of Rule 6 of the Cenvat Credit Rules, 2004
The appellant, a manufacturer of 'Dehumidifying Type Compressed Air Dryer,' supplied goods to NTPC under international competitive bidding with full duty exemption under Notification No. 6/2006-C.E. The appellant mistakenly paid an amount under Rule 6(3)(b) of the Cenvat Credit Rules due to using common Cenvated input for both dutiable and exempted goods without maintaining separate accounts. Upon realizing the error, they sought recredit of the amount paid. The Assistant Commissioner allowed the recredit, confirming that the provisions of Rule 6(1), (2), and (3) were not applicable due to the exemption under Rule 6(6). The Commissioner (Appeals) upheld the demand for penalty and alleged excess credit utilization, leading to the appeal.

Issue 2: Imposition of penalty and alleged excess credit utilization
The appellant argued that they were not required to reverse the Cenvat credit amount under Rule 6(3)(b) and promptly informed the Department for recredit, which was allowed by the Assistant Commissioner. The appellant contended that the penalty for taking suo motu credit and the allegation of excess credit utilization were unjustified. The Revenue opposed the stay application, emphasizing the ineligibility of the appellant for suo motu credit. However, the Tribunal found that since the Assistant Commissioner permitted the recredit and the appellant had a strong prima facie case, the penalty and demand for excess credit utilization were not sustainable. Consequently, the Tribunal waived the pre-deposit requirement and stayed the recovery pending the appeal's disposal.

In conclusion, the Tribunal held in favor of the appellant, allowing the stay application and waiving the pre-deposit requirement for the Cenvat credit demand, interest, and penalty until the appeal's final resolution.