By TIOL News Service

MUMBAI, AUG 10, 2016: THE appellant is engaged in the manufacture of Organic Chemicals viz. Glacial Acetic Acid, Ethyl Acetate, Acetic Anhydride and Piperidine.

The appellant used molasses as an input in the manufacture of Rectified spirit and Extra Neutral Alcohol. Since both the products were exempt, they reversed proportionate CENVAT Credit @ Rs. 750/- PMT used in the manufacture of products in question in terms of Rule 6(3)(ii) of the CCR, 2004 during the period April 2009 to September 2009.

Subsequently, the appellant submitted a refund claim ofRs.17,29,019/- in terms of s.11Bof CEA, 1944 on the premise that they had reversed credit in excess in terms of Rule 6(3) of CCR, 2004. Inasmuch as it was their contention that they should have paid only an amount @5%/10% of the value of the exempted goods and, therefore, the difference between the amount paid and that payable is sought as refund.

The claim was rejected on the ground that appellant had correctly reversed the proportionate CENVAT credit by availing the option provided under Rule 6(3)(ii) of CCR, 2004.

The Commissioner (A) rejected the appeal and, therefore, the appellant has knocked the doors of the CESTAT.

It is submitted that under Rule 6(3) of CCR, 2004 there are two options available i.e. (1) reversal of credit on proportionate basis viz. Rule 6(3)(ii) &(2) payment of 5%/10% value of the exempted goods viz. Rule 6(3)(i). Moreover, it is upto the appellant to avail the option and, therefore, though the appellant paid proportionate credit but were entitled to pay 5%/10% of the value of the exempted goods, the excess payment should be refunded.

The AR submitted that the appellant had on their own chosen the option of payment of proportionate CENVAT Credit in terms of Rule 6(3)(ii) and, therefore, after availing such option now the appellant cannot claim that they were supposed to pay @5%/10% in terms of Rule 6(3)(i). Furthermore, Explanation 1 to Rule 6(3) clearly provided that whichever option is availed by the assessee in particular financial year, such option cannot be withdrawn during the remaining part of the financial year and hence there is no question of there being any excess payment and consequent refund.

The Bench inter alia observed -

"…It was appellant who opted to pay proportionate Cenvat credit on their own. In Rule 6(3) two options are available i.e. (1) payment of 5%/10% of the value of exempted goods and (2) proportionate Cenvat Credit attributed to the inputs consumed in the exempted goods. Explanation (1) to Rule 6(3) is very clear, which provides that in a financial year once any particular option is availed, the same cannot be withdrawn, that means when the assessee has availed option for payment of proportionate credit as provided under Rule, they are not allowed to change the option and claim that they want to pay 5%/10% of value of the exempted goods, therefore the refund of differential duty is not admissible…."

Noting that the findings of the Commissioner (Appeals) did not require any interference, the impugned order was upheld &the appeal was dismissed.

(See 2016-TIOL-2026-CESTAT-MUM)