2006 (7) TMI 514 - AT - Central Excise

Summary

Issues:
1. Applicability of Rule 6 of Cenvat Credit Rules, 2002 in the case of manufacturing Steam Turbines and Gas Turbines.
2. Correct calculation of the amount to be reversed under Rule 6 based on the Board's Circular.
3. Defects in the Show Cause Notice and Adjudication Order demanding the entire amount reversed.
4. Interpretation of the Rule regarding the collection of the reversed amount from customers.
5. Absence of invoking Section 11D and duty representation allegations in the Show Cause Notice.

Analysis:

1. The appeal was filed against an order passed by the Commissioner of Central Excise regarding the appellants availing exemption under Notification No. 6/2002-C.E. for manufacturing Steam Turbines and Gas Turbines. The issue revolved around the applicability of Rule 6 of Cenvat Credit Rules, 2002, which required the reversal of 8% of the sale price of goods due to availing Cenvat credit on inputs.

2. The Show Cause Notice was issued to the appellants for reversing 8.64% of the price instead of the stipulated 8% for supplies to customers. The calculation of the amount to be reversed was based on the Board's Circular, resulting in a demand for Rs. 59,24,356. The Tribunal found defects in the Notice as it failed to consider that the appellants had actually reversed Rs. 58,89,456, leading to an incorrect demand calculation.

3. The Tribunal noted that the Adjudicating Authority had not properly applied their mind in demanding the entire amount without considering the differential duty of Rs. 34,900. The non-application of mind in the Show Cause Notice and Adjudication Order was evident, leading to the set aside of the impugned order due to the excessive demand based on flawed calculations.

4. Regarding the collection of the reversed amount from customers, the Tribunal clarified that as long as the appellants complied with Rule 6 of the Cenvat Credit Rules, the collection from customers did not warrant additional demands. The Tribunal emphasized that the appellants had reversed more than the required amount as per the Rule, and there was no prohibition on collecting this amount from customers.

5. The absence of invoking Section 11D and the failure to allege that the collected amount represented duty from buyers in the Show Cause Notice were highlighted. The Tribunal concluded that there was no merit in the impugned order, setting it aside and allowing the appeal in favor of the appellants.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Bangalore, highlighted the key issues, calculations, defects in the Notice, interpretation of rules, and the ultimate decision in favor of the appellants.