2006 (3) TMI 615 - AT - Central Excise

Summary

Issues:
1. Dispute regarding dutiability of clinker manufactured in specified Excise duty exempt areas of Himachal Pradesh.
2. Interpretation of Notification No. 67/95 for exemption eligibility.
3. Application of proviso to the notification concerning inputs used in the manufacture of exempted final products.
4. Claim of exemption under Sl. No. (vi) of the proviso to the notification.
5. Relevance of Rule 6 of CENVAT Credit Rules in the context of dutiable and exempt goods.
6. Applicability of case laws in determining exemption eligibility.

Analysis:
1. The dispute in the appeals revolved around the dutiability of clinker manufactured in Excise duty exempt areas. The Commissioner (Appeals) held that clinker is liable to pay Excise duty as it is not eligible for exemption under Notification No. 67/95, which exempts goods used as inputs in the same factory where they are manufactured.

2. Notification No. 67/95 grants exemption to specified goods manufactured in a factory and used as inputs in the production of specified final products. The proviso to the notification excludes inputs used in the manufacture of final products exempt from duty. The contention was whether clinker used in producing exempt cement qualifies for exemption under the notification.

3. The proviso to the notification posed a challenge as it restricts exemption for inputs used in manufacturing exempt final products. Since the final product, cement, was exempt under Notification No. 50/2003, the proviso seemed to bar clinker from exemption. The argument was whether the exception in Sl. No. (vi) to the proviso applied in this scenario.

4. The appellants claimed exemption under Sl. No. (vi) of the proviso, stating that they produced both dutiable (clinker) and exempt (cement) products, and did not take Modvat credit for inputs used in exempt cement production. They argued that the clinker should be exempt as per the exception in the proviso.

5. The relevance of Rule 6 of CENVAT Credit Rules was discussed concerning the production of dutiable and exempt goods. The contention was that since cement was fully exempt, the appellants did not meet the requirements of Rule 6, and hence, the exemption was not applicable.

6. The appellants cited various case laws to support their claim for exemption. However, the Tribunal rejected their claim, emphasizing that the production of clinker as an input for exempt cement did not align with the provisions of Rule 6. The Tribunal held that the exemption was not available to the appellants, and the appeals were rejected.

In conclusion, the judgment clarified the interpretation of Notification No. 67/95 in the context of dutiable and exempt goods, emphasizing the application of the proviso and Rule 6 of CENVAT Credit Rules. The decision highlighted the ineligibility of the appellants for exemption under the notification due to the nature of their production and final products.