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PJ/Case Laws/2012-13/1155

Whether an assessee who is engaged in the activity of manufacturing has correctly reversed the duty or not.
CASE: - C.C.E., MANGALORE V/S MANGALORE REFINERY AND PETROCHEMICS LTD.
CITATION: - 2012 (280) E.L.T 383 (KARNATKA)
ISSUE:- Whether an assessee who is engaged in the activity of manufacturing has correctly reversed the duty or not.
BRIEF FACTS:- This appeal by the revenue aggrieved by the order of CESTAT, holding that proportionate reversal of Cenvat credit taken on the inputs which are utilized for manufacture of exempted product, is enough to satisfy the provisions of Rules 6(2) and 6(3) and therefore, it upheld the order passed by the appellate authority and set aside the order passed by the assessing officer which had denied benefits to the assessee.
The assessing officer in the course of assessment held that, assessee has reversed an amount of Rs. 9, 26,761/- being the credit of duty and paid on the inputs used for manufacture of DM water which is in Contravention of the Cen­vat Credit Rules, 2004. Therefore, he proceeded to pass an order holding that, a sum of Rs. 19, 44, 64,354/- would be 10% of the value of the same as issued in the show cause notice for the period from 1-3-2005 to 11-4-2005 under Rule 14 of the Cenvat Credit Rules, 2004 r/w Rule 6 of the Cenvat Credit Rules 2004 and Sec­tion 11A of the Central Excise Act, 1944 is due from the assessee. As against the said demand, a sum of Rs. 9, 26,761/- already paid by him was appropriated and a demand was also issued for interest and a penalty of Rs. 10,000/- is also de­manded. It is this order which is reversed by the both 1st appellate authority and 2nd appellate authority.
Resaoning:- Therefore, the question for consideration in this appeal is, when the assessee during the course of production of steam are using such common inputs and inputs services for manufacture of both dutiable and exempted final prod­ucts. Further, when they have not opted to maintain a separate account for receipt, con­sumption and inventory, on such inputs meant for use in the manufacture of du­tiable final products and the quantity of inputs meant for use in the manufacture of exempted product. Also when they have cleared the same which was manufac­tured with the use of Cenvat Credit from M/s HPCL on payment of duty, the assessee has an option of paying the amount equivalent to the Cenvat credit for the use in or in relation to the manufacture of final products namely, steam. Therefore, it is a clear case of ascertaining the liability of the assessee which fails within the terms of determination of rate of duty payable by the assessee.
If that is so, in view of Section 35G, that determination is outside the scope of the appeal before this court, it is a matter to be agitated in appeal under Section 35L of the Act before Apex Court.
DECISION: -   The appeal was rejected.
Comment: -When the case relates to rate and valuation of duty then the matter is to be decided by Apex Court. But Honorable High Court has held that the reversal of Cenvat credit also relates to rate of duty. Hence, the appeal lies with Apex Court.
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