SATENDRA VIKRAM SINGH

The Revenue has filed this appeal against impugned order passed by the Commissioner (Appeals), CGST and Central Excise, Rajkot wherein he had upheld the order of the lower authority and rejected the appeal filed by the Department.

1.1 M/s Metal Alloys Corporation (Respondent) are engaged in the manufacture of Brass falling under Chapter 74 of the Central Excise Tariff Act, 1985 as well as processing of raw materials or semi-finished goods on job work basis. The goods manufactured on Jobwork basis for Indian Ordinance factory were finally exempted from duty under Notification No. 70/1992-CE dated 17.06.1992 as amended vide notification No. 66/1995-CE dated 16.03.1995. They are availing Cenvat credit under Cenvat Credit Rules, 2004 (hereinafter referred to as the “CCR, 2004”). The issue was that the respondent was using LPG which is common input for both dutiable goods as well as exempted goods. The department therefore issued a show cause notice to the respondent on 3rd May, 2017 proposing recovery of Cenvat Credit of Rs. 91,97,469/- @6%/7% of value of exempted goods/ exempted services under Rule 6(3) of the CCR, 2004 read with Rule 14 of the CCR, 2004 and Section 11A(4) of the Central Excise Act, 1944 along with interest under Rule 14 read with Section 11AA and penalty under Rule 15(2) of CCR, 2004 read with Section 11AC of the Central Excise Act, 1944. Annexure-A to the show cause notice gives details of the amount proposed to be recovered as per Rule 6(3) of CCR, 2004.

1.2 In Adjudication proceedings, learned Adjudicating Authority in para 5.5 noted that the respondent had reversed proportionate Cenvat Credit of Rs. 1,09,181/- along with interest of Rs. 60,157/- on 07.07.2017 on LPG which is common input used for manufacture of dutiable as well as exempted goods. While setting aside the demand, he relied on the decision of Hon’ble Supreme Court in the case of M/s Chandrapur Magnets Wires (P) Ltd. reported at 1995 (81) ELT 3 (SC) and the decision of CESTAT Mumbai in the case of M/s. Marcedes Benz India Ltd Vs. CCE, Pune-I, reported at 2015 (40) STR 381 and accepted proportionate reversal of credit along with interest. Aggrieved with the above order, Revenue filed before the Commissioner (Appeals) who rejected the department’s appeal by upholding the order of the Adjudicating Authority. Therefore, Revenue filed the present appeal before this Tribunal.

2. In their appeal, Revenue has mentioned the following points: -

• As per Rule 6(1) of the Cenvat Credit Rules, 2004, Cenvat credit shall not be allowed on such quantity of inputs as is used in or in relation to the manufacture of exempted goods or for provision of exempted services. In case, a manufacturer uses inputs and/or input services for manufacture of exempt as well as dutiable goods or for providing exempt as well as taxable services, he shall maintain a separate account as per rule 6(2) of CCR, 2004. In case, such manufacturer is not able to maintain separate account, he shall follow the provisions of Rule 6(3) of the CCR, 2004, The provision of this Rule have been amended from time to time, but the crux is that if a manufacture does not maintain separate account for receipt, consumption and inventory of inputs as per Sub-rule (2), he shall pay an amount equal to 6% of the value of the exempted goods; or pay an amount as determined under Sub-rule (3A) of this rule.

• For availing the benefit of sub-Rule (3A), a manufacture has to give option by intimating in writing to the Jurisdictional Range Superintendent particulars such as name, address and registration number, date from which option under this clause is exercised or proposed to be exercised, description of dutiable goods or taxable services, description of exempted goods are exempted services and Cenvat credit on inputs and input services lying in balance.

• W.e.f. 01.04.2016, Sub-rule (3A) has been substituted to provide a detailed method of calculation of amount to