2006 (4) TMI 289 - AT - Central Excise

Summary

Issues involved: Application for waiver of pre-deposit of duty and penalty arising from disallowance of Cenvat Credit on input used for manufacturing exempted goods.

Summary:

Issue 1: Disallowance of Cenvat Credit on input used for manufacturing exempted goods
The duty demand and penalty imposed on the applicant were confirmed due to disallowance of Cenvat Credit on inputs used for manufacturing exempted goods during the material period. The Show Cause Notice indicated that the credit of duty paid on inputs received by the applicant was taken from a specific source. The Commissioner (Appeals) held that credit was not available as the inputs were imported duty-free, which was deemed prima facie incorrect by the Tribunal. The applicants invoked sub-rule (5) of Rule 6 of the Cenvat Credit Rules 2002, arguing that the prohibition on taking Cenvat Credit for manufacturing exempted goods did not apply to goods cleared for export under Bond as per the rules. The Tribunal observed that the Commissioner (Appeals) did not address this argument, and there appeared to be no restriction on availing Cenvat Credit for goods exported under Bond.

Therefore, the Tribunal decided to waive the pre-deposit and stay the recovery pending the appeal, based on the arguments presented and the lack of a clear bar on availing Cenvat Credit for exported goods under Bond.

*(Dictated in court)*