By TIOL News Service

CHENNAI, SEPT 29, 2017: THIS is a Revenue appeal.

The facts: M/s.Mount Mettur Pharmaceuticals Ltd. were asked to pay an amount of Rs.1,27,16,888/- under Rule 6(3)(b) of the CCR, 2004, being 10% of the total price (excluding taxes) of the exempted final products cleared from their factory during the period 16.05.2005 to 31.03.2006.

This was because they had not maintained separate accounts in respect of Furnace Oil (fuel), a common input, used in the manufacture of the dutiable and exempted final products.

The demand was confirmed by the original authority.

Nonetheless, the undisputed fact is that the entire credit taken on the fuel was reversed by the party after issuance of the show-cause notice.

The CESTAT 2008-TIOL-2198-CESTAT-MAD held that the demand of 10% is not sustainable in view of the settled position of law, in particular the decisions in Chandrapur Magnet Wires (P) Ltd - 2002-TIOL-41-SC-CX and Hello Minerals Water (P) Ltd. - 2004-TIOL-57-HC-ALL-CX. However, the assessee was directed to pay the appropriate interest within 30 days subject to which the appeal was allowed.

Revenue is aggrieved with this order and is in appeal before the Madras High Court. The primary ground is that the reversal of credit was made not prior to removal of the exempted goods but after the issuance of the SCN and, therefore, the cited decisions do not apply.

The High Court adverted to the decision in Sundaram Fasteners Limited - 2014-TIOL-201-HC-MAD-CX and held that the levy of interest is valid and so also the setting aside of the demand.

It was also noted that an amendment was made to Rule 6 of the CCR, 2004 by Section 73 of the Finance Act, 2010, which was given retrospective effect from September 2004 and which allowed reversal of credit attributable to the inputs used in exempted products along with interest in circumstances like the present case.

Concluding that there is no manifest error in the final order of the CESTAT, Madras, in setting aside the demand, and restricting the same only to interest, the substantial questions of law, raised in the instant appeal, were answered against the revenue.

The Civil Miscellaneous Appeal was dismissed.

(See 2017-TIOL-2046-HC-MAD-CX)