Obligation under Rule 6 of CCR

PJ/Case Laws/2011-12/1346

Case: COMMISSIONER OF C. EX., MANGALORE versus KUDREMUKH IRON & STEEL CO. LTD.

Citation: 2011 (271) E.L.T. 172 (Kar.)

Issue:- Obligation under Rule 6 of CCR - whether reversal of 8% of sale value of exempted goods required when assessee reversing cenvat credit taken on inputs and input services?

Brief Facts:- Respondent-assessee is a manufacture of pig iron. They were taking Cenvat credit on the inputs used. The pig iron is cleared on payment of duty on the basis of the CT-3 certificates. They were not maintaining separate accounts of inputs and input services used in manufacturing exempted and dutiable goods.

Revenue proceeded against assessee and contended that they ought to have reversed 8% of the sale value of the goods involved. Therefore, penalty of Rs. 1,500/- was imposed. An appeal was preferred by the Revenue, which was rejected.

Aggrieved by the same, Revenue has preferred an appeal to the Tribunal. The Tribunal relying on the judgment rendered by the Larger Bench in the case of Nicholas Piramal (India) Ltd. v. Commissioner of Central Excise, Thane-I reported in 2008 (232) E.L.T. 37 (Tri. - LB) dismissed the appeal upholding the order of the Commissioner (Appeals). It was held that when the credit attributable to the inputs used in exempted product is reversed, then there would not be any need for reversal of 8% of the sale value of the exempted products.

Aggrieved by the said order, the present appeal is filed before the High Court.

Reasoning of Judgment:- The High Court noted that during pendency of this appeal, Finance Act, 2010 amended Rule 6 of Cenvat Credit Rules, 2001 and gave retrospective effect from 1st day of July, 2001 to the 28th day of February, 2002 and subsequently, from the 1st day of March, 2002 to the 9th day of September, 2004.

It was held that once the cenvat credit taken is reversed, there is no liability to pay excess duty at 8% or penalty, interest as directed by the Assessing Authority. That is, precisely what the authorities have held without this amendment. When once amendment is made to the said rules giving the said benefit and it is expressly made retrospectively, the amendment takes care of this case. Question answered in favour of assessee.

Decision:- Appeal dismissed.
Comment:- The retrospective amendment under Rule 6 to allow the proportionate reversal was welcome step. The High Court has also allowed the same to the assessee.

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PJ/Case Laws/2011-12/1346

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