TMI Blog2013 (8) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... redit, 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, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture of dutiable goods as well as exempted goods. The appellant also submitted a letter dt. 10.11.2008 to the department wherein they informed the department of the maintenance of separate accounts for the inputs. The appellants factory was visited by excise officers in September, 2009 and it was pointed out to them that they were required to maintain separate accounts in respect of both inputs as well as input services which are commonly used for the manufacture dutiable as well as exempted products. The appellant immediately reversed the entire credit amounting to Rs.11,02,970/- taken on the input services along with interest thereon and intimated the same to the department vide letter dt. 25.9.2009. Another amounts of Rs.3,52,661/- and Rs.2,78565/- were paid by them on 1.10.2009 and 23.11.2009 towards service tax credit taken on input services which were used in the manufacture of both dutiable as well as exempted product which was also intimated to the department. Show cause notice dt. 15.2.2010 was issued the appellant alleging that if the appellant did not maintain separate accounts in respect of common input services used in the manufacture of both dutiable as well as e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t taken during the period along with interest thereon prior the issue of show cause notice, not only in respect of exempted products but also in respect of dutiable products. Thus the credit taken by them has been completely reversed which amounts to non taking of credit. (2) He relied on the decision of the Hon'ble High Court of Allahabad in the case of Hello Minerals Water (P) Ltd. Vs. Union of India 2004 (174) E.L.T. 422 (All.) wherein it was held that reversal of Modvat Credit amounts to non-taking of credit and such reversal can be made even subsequent to the clearance of the final products. A similar view was taken by the Hon'ble Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. 1996 (81) E.L.T. 3 (S.C.). The Apex Court held that when Modvat credit is reversed before removal of the exempted final products, it tantamount to non-taking of credit. The same view was followed by the Hon'ble High Court of Gujarat in the case of Commissioner of Central Excise Vs. Ashima Dyecot Ltd. 2008 (12) STR 071 and by this Tribunal in the case of Face Ceramics Pvt. Ltd. Vs. Commissioner of C.Ex. Rajkot 2010 (249) E.L.T. 119 (Tri.-Ahmd.), and Emcure Pharmaceuticals Ltd. Vs. Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal determination of the proportionate credit annually and payment of interest on the credit, if any taken, @24% p.a. and so on. In the present case, the appellant herein has not followed any of the procedures prescribed in sub-rule (3A) of Rule 6 and, therefore, the appellant would not be eligible for reversal of credit attributable to input services used in the manufacture of exempted goods under rule 6(3) (ii). Therefore, he prays for upholding the impugned order. 5. We have carefully considered the rival submissions. 5.1 It will be relevant at this juncture to peruse the provisions of Rule 6 which is reproduced below:- Rule 6. Obligation of a manufacturer of dutiable and exempted goods and provider of taxable and exempted services. - (1) The CENVAT credit shall not be allowed on such quantity of input or input service which used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... output service shall follow the following procedure and conditions, 5.2 In the present case it is an admitted fact the 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 even though they maintained such accounts in respect of inputs. Therefore, 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 the mistake was pointed the appellant 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. Therefore, 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. The Hon'ble High Court of Allahabad in the Hello Minerals Water (P) Ltd. case cited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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