Rule 6, “CENVAT reversal” amount recovery permissible from customers
M/s Jyoti CNC Automation Ltd, had used CENVAT able inputs and input services for manufacturing of both dutiable and exempted goods and accordingly, opted to pay an amount at the prescribed rate Rule6(3)(i) of CENVAT Credit Rules. Show cause notice was issued alleging that assessee had recovered said amount and Education Cesses from its customers to whom exempted goods were cleared, meaning thereby that the assessee had not passed on the benefit of exemption to the customers and credit availed had been retained in CENVAT Credit Account.
In the case of Unison Metal [2006 (204) ELT 323 (Tri.-LB)], it was clarified that so long as the amount of 8% / 10% was paid to the Govt in terms of the erstwhile Rule 57CC of Central Excise Rules or Rule 6 of CENVAT Credit Rules, the provisions of Section 11D shall not apply even if the amount was recovered from the buyers.
In the present case, the show cause notice had not invoked Section 11D and had also not alleged that amount had been collected from buyers as representing excise duty. Also, the Revenue had not made any attempt to verify whether the buyers of the exempted goods had availed CENVAT credit on such invoices issued by the assessee or not.
Hence, in the light of CBEC Circular No. 940/1/2011-CX dated January 14,2018, which clarified that in case the assessee pays an amount as central excise duty on exempted goods, the same cannot be allowed as CENVAT credit to the downstream units, could not be relied for confirmation of demand, held the Appellate Commissioner. The invocation of extended limitation period u/s 11A was also held to be unjustified, for the assessee’s records were audited regularly by the Revenue and no such objection was raised in the past. Reliance in this regard was placed on Bangalore CESTAT decision in Pragathi Concrete Products Pvt. Ltd. [2005 (183) ELT 487 (Tri-Bang)] as affirmed by SC [2015 (332) ELT 819 (SC)]. In view thereof, Commissioner (Appeals) set aside the impugned order on merit as well as on limitation. Assessee was also not held liable to interest under Rule 14 r/w Section 11AA and to penal action under Rule 15 r/w Section 11AC.
Case details: In the Matter of Jyoti CNC Automation Ltd. Vide Order-In-Appeal-No. RAJ-EXCUS-000-APP-154-2018-19 dated August 09,2018