2007 (4) TMI 187 - HC - Central Excise

Issues:
1. Challenge to the judgment of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) by the department.
2. Admissibility of Cenvat credit under Rule 6(2) of Cenvat Credit Rules.
3. Application of Rule 6 of Cenvat Credit Rules to the case.
4. Interpretation of Rule 6(3) of Cenvat Credit Rules.
5. Reversal of Cenvat credit by the assessee.
6. Contention regarding the applicability of Rule 6(1) of Cenvat Credit Rules.
7. Payment of 8% duty at the time of clearance of non-excisable goods.

Analysis:

1. The department challenged the judgment of CESTAT and Commissioner (Appeals) regarding the admissibility of Cenvat credit under Rule 6(2) of Cenvat Credit Rules. The department contended that the Cenvat credit availed by the respondent was not admissible as there was no sale of ethyl alcohol for the manufacture of Indian Made Foreign Liquor (IMFL). The department issued show cause notices to the respondent for contravention of Rule 6(2) of Cenvat Credit Rules, claiming a differential duty amount.

2. The Deputy Commissioner discharged the show cause notices after considering the reversal of Cenvat credit by the assessee under sub-rule (3)(b) of Rule 6. The Deputy Commissioner observed that the 8% amount was calculable on the value of rectified spirit, not on the value of IMFL. The Deputy Commissioner's decision was based on the interpretation of Rule 57-AD(1) and Rule 57AD(b) of the Central Excise Rules, which are similar to Rule 6 of Cenvat Credit Rules.

3. The Commissioner (Appeals) upheld the assessee's payment of 8% duty based on the price of rectified spirit sold from their unit. The Commissioner rejected the department's contention that the payment of 8% duty applied only to excisable goods chargeable to nil rate of duty. The Commissioner considered the admitted facts, including the use of molasses in manufacturing denatured and exempted products, and the sale of rectified spirit from the unit, to support the assessee's payment calculation.

4. The CESTAT concurred with the Commissioner (Appeals) and upheld the order, confirming the applicability of the 8% duty payment on the value of rectified spirit. The CESTAT's decision was brief, expressing agreement with the Commissioner's findings based on the documentary evidence provided by the assessee.

5. The learned Assistant Solicitor General argued that Rule 6(3) did not apply unless excisable and non-excisable products were produced by a common process. However, the court disagreed, stating that Rule 6 did not require such a condition. The court also rejected the argument that only Rule 6(1) applied, emphasizing that Rule 6(1) explicitly referred to sub-rule 2. The court clarified the method for reversing Cenvat credit under Rules 2 and 3, noting that the payment of 8% duty by the assessee at the time of clearance was a valid method of reversal.

6. The court concluded that no substantial question of law arose in the matter and dismissed the First Appeal, affirming the decision regarding the admissibility and payment of Cenvat credit under Rule 6 of Cenvat Credit Rules.