2018 (2) TMI 1793 - AT - Central Excise

CENVAT Credit - appellant engaged in manufacturing and trading activity - Rule 6(3)(i) of CCR 2004 - Held that - The appellant have prevented from leading evidence in support of their contention that they have taken only proportionate Cenvat credit as permissible under Rule 6(1), and as such the provision of Rule 6(3) were not attracted. Similar view was taken by the Division Bench of this Tribunal in the case of MIRC Electronics Ltd. vs. CCE, 2013 (11) TMI 1422 - CESTAT MUMBAI . Appeal allowed by way of remand to the Adjudicating Authority, who shall after hearing the appellant pass a reasoned order.

Summary

Issues involved: Whether the appellants are required to reverse any amount under Rule 6(3)(i) of Cenvat Credit Rules, 2004.

Analysis:
1. The appellants were engaged in both manufacturing and trading during 2011-12 and 2012-13. They availed Cenvat credit on inputs, capital goods, and input services. A show cause notice revealed substantial turnover from trading activities, which were considered exempted services from 01/04/2011. The appellants were asked to reverse an amount under Rule 6(3)(i) based on a percentage of their trading turnover. The appellants reversed some amounts but disputed the obligation to pay further interest under Rule 6(3) of CCR, claiming they did not avail Cenvat credit on input services related to trading. The Revenue disagreed, citing the lack of separate accounts as required by Rule 6(2) & 6(3) of CCR, 2004. The SCN proposed a demand and interest, leading to a penalty imposition under Rule 15 read with Section 11AC of the Act.

2. The appellants failed to respond to the SCN and did not appear on the scheduled dates for adjudication. The demands were confirmed, and a penalty was imposed. The appeal was rejected by the Learned Commissioner (appeals), prompting the appellants to approach the Tribunal.

3. The appellants argued that they only took Cenvat credit for taxable activities, not for trading. They claimed to have reduced the credit by 10% for trading activities, making Rule 6(3) inapplicable. They requested a remand to present evidence before the Adjudicating Authority, citing reasons for their non-appearance at previous hearings.

4. After considering the submissions, the Tribunal found merit in the appellant's argument and referred to a similar case precedent. The Tribunal set aside the impugned order and allowed the appeal by remanding it to the Adjudicating Authority for a reasoned decision in accordance with the law. The appellants were directed to appear before the Authority with their reply and evidence within 60 days from the date of the Tribunal's order.