Facts –

• The Appellant, M/s Aurum Pharmachem Private Limited, is engaged in the manufacture of dutiable final products falling under Tariff Item No.32110000 and also exempted goods, viz. Sulfurized Karanja Oil falling under Tariff Item No.15180039 of the First Schedule to the Central Excise Tariff Act, 1985. 
• Appellant have taken Cenvat credit of service tax paid on the input services, viz, GTA Service (carriage inward), Customs House Agent Service, Telephone Service, ISO Certification Service etc. and utilized such credit towards payment of duty on their final product during the period from July, 2010 to March, 2014.
• Department contended and raised show cause notice dated 29 July 2015 for recovery of amount pertaining to exempted goods on the ground that separate accounts had not been maintained for receipt and use of common input services in respect of dutiable final products as well as exempted goods. 
• Aggrieved, the Appellant approached this Tribunal.

Issue –

• Whether recovery of Cenvat Credit in respect to the amount of exempted goods along with interest and for imposition of penalty is maintainable?

Order –

• The Tribunal found that issue in the present appeal is whether the Appellant not having maintained separate accounts in respect of the common input services used for manufacture of dutiable final products as well as exempted goods is mandatorily required to pay an amount equal to 5% (effective up to 16.03.2012) and 6% (w.e.f.17.03.2012) of the value of exempted goods.
• It was observed that the Appellant has reversed the credit attributable to the common input services used in or in relation to the manufacture of exempted goods.
• The Tribunal relied upon its own case of Philips Carbon Black Limited – 2019 wherein it was held that non-compliance of the procedure prescribed under Rule 6(3A) of the Cenvat Credit Rules, 2004 does not result in loss of substantive right of the assessee to avail the option of reversing proportional credit and such non-compliance is at best a procedural lapse, which can be condoned.
• Further, relying to the judgement of Hon’ble Supreme Court in the case of Chandrapur Magnet Wires [1996 (81) ELT 3 (SC)] wherein it was held that reversal of credit along with interest amounts to a situation, which is akin to as if the assessee had never availed such credit at the first place.
• Hence, the Tribunal ruled that recovery of the amount of exempted goods along with interest and for imposition of penalty not maintainable and appeal was allowed.