Order Date: 31 August 2022

Facts-

• The Respondent, M/s Maihar Cement is cement manufacturing units being Maihar Cement-Unit 1 & 2 Both the units are sister units and were registered separately under the erstwhile Central Excise Rules, 1944 and they are located adjacent to each other, managed by common managerial personnel from a common factory office.
• Appellant-revenue urges that the issue involved is that the respondent/Unit-I have cleared exempted excavated limestone from their mines to M/s Maihar Cement Unit II, both owned by a single proprietor i.e., Century Textiles and Industries Limited, without reversing the CENVAT Credit @ 10%, 5% & 6% during the period March 2007 to July 2015 (they were manufacturing dutiable as well as exempted goods). Therefore, it was alleged that respondent i.e. Unit 1 has violated Rule 6(3)(b) and/or Rule 6(3)(i) of Cenvat Credit Rules, 2002/2004 and is liable to pay 10%/5%/6% of the sale value/value cleared to Unit 2. Penalty was also proposed to be imposed upon the respondent.
• The Respondent filed separate replies to all the show cause notices and contested the demand both on merits and limitation i.e. demand is time barred.
• Commissioner (A) held that there was no ‘sale’ of goods i.e. limestone from unit 1 to 2 is as much as both the units belong to one company only. Thus, the essential ingredient of Rule 6(3)(b) of Cenvat Credit Rules 2002/2004, i.e. ‘sale’ of limestone from unit 1 to 2 is not satisfied. 
• Revenue being aggrieved, has filed appeals before this Tribunal.

Issue-

• Whether the order passed by the commissioner of central excise is sustainable?

Order-

• The Tribunal observed that the show cause notices are misconceived for any demand under Rule 6(3)(b)/6(3)(i) due to the admitted fact that the appellant have admittedly reversed the proportionate credit on input/explosives for limestone cleared from the captive mines to Unit-2. Rule 6 provides for a mechanism to reverse Cenvat credit either proportionately, if it can be calculated, and in the alternative, if the same cannot be calculated with ease, the rule provides for reversal of Cenvat credit taken on common inputs by reversing a specified percentage of the sales/transfer value of the exempted product. Such reversal is restricted to the opening balance of credit in the Cenvat account at the beginning of the period as modified by Cenvat credit taken during the accounting period.
• The appellant has reversed the proportionate Cenvat credit in terms of Rules 6 (3)(ii) of CCR, thus, there is no application of Rule 6 (3)(i). It is further found that the situation is wholly revenue neutral, as both the units under common management and ownership are paying duty on their dutiable finished product namely cement and clinker. In case, duty was paid in terms of Rule 6(3)(i), the same was available as credit to unit 2 as input credit.
• The Tribunal held that there is no merit in the appeals of revenue. Accordingly, the appeals are dismissed and the impugned order is upheld.