The simple non-filing of the declaration cannot be the reason for refusing the proportional inversion of the credit: CESTAT

The CESTAT Bank of Ahmedabad has ruled that mere failure to file a statement cannot be a reason for denying proportional cancellation of credit under Cenvat Credit Rules, 2004.

The appellants are engaged in the manufacture of pharmaceutical products, some of these products are exempt. Initially, they used the Cenvat credit for all common inputs and services that were used in the manufacture of dutiable and exempt goods. The appellant subsequently canceled the cenvat credit allocated to the exempt goods on the due date.

The department was of the view that since the appellant did not file a prorated credit cancellation option statement, he is required to pay 6% of the value of the exempted goods, therefore, the differential claim was confirmed.

On appeal, the Commissioner (Appeals) found that the appellant is liable to pay 5%/10% on the basis that he failed to file a statement as required for payment of the prorated credit under Rule 6( 3)(A) of Cenvat Credit Rules, 2004.

The Judicial Member, Mr. Ramesh Nair, observed that it is undisputed that the Appellant has indeed canceled the prorated credit.

“Therefore, in my opinion, as held by the Honorable Supreme Court in Chandrapur Magnet Wires (P) Ltd. 1996 (81) ELT 3 (SC), the annulment of Cenvat Credit amounts to the non -use of Cenvat Credit, if so, Rule 6 does not apply Alternatively, once the appellant has canceled the Cenvat Credit proportionally, he has opted for the cancellation of the proportional credit, then the taxman cannot insist on another option which the Appellant has not opted for.As regards the non-filing of the statement, which is only the procedural requirement.Due to the expiration of the procedural requirement, the substantial benefit of the proportionate reversal of the Cenvat credit cannot be disputed”, observed the Court.

Granting relief to the appellant, the Tribunal held that “from the particulars requested in the statement, I conclude that the same are otherwise available from the department, therefore, even if the particulars were not stated in the prescribed form but the details are otherwise which are to be declared in the form are otherwise available from the department, therefore mere failure to file a declaration cannot be the reason for the appellant’s option for the proportional undo is not available. The cases cited by the appellants are directly applicable to the facts of this case. Accordingly, I am of the view that the appellant properly reversed the prorated credit. Therefore, no additional payment can be demanded from the appellant.

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Ami Lifesciences Pvt Ltd v CCE and ST-Vadodara-I

Counsel for the Appellant: Dhaval Shah

Counsel for the Respondent: Ghanshyam Soni


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