2007 (1) TMI 402 - AT - Central Excise

Summary

Issues:
1. Disallowance of Cenvat credit on inputs used in the manufacture of exempted goods.
2. Interpretation of Rule 57AD and Rule 57AH regarding Cenvat credit recovery.
3. Applicability of precedent cases in determining Cenvat credit recovery.

Analysis:

1. The main issue in this case revolves around the disallowance of Cenvat credit on inputs used in the manufacture of stove parts, which were later exempted from duty. The Commissioner (Appeals) initially held that disallowing the Cenvat credit was not sustainable based on a decision by the Larger Bench of the Tribunal in a previous case. The Revenue sought demand for the availed Cenvat credit on inputs, arguing that Rule 57AD prohibits Cenvat credit on inputs used in the manufacture of exempted goods. However, the Commissioner's decision was based on the precedent that credit need not be reversed when the final product is exempted from duty unless it was illegally or irregularly taken.

2. The interpretation of Rule 57AD and Rule 57AH played a crucial role in the judgment. The Revenue contended that Rule 57AD explicitly states that Cenvat credit should not be allowed on inputs used in the manufacture of exempted goods. Additionally, Rule 57AH provides for the recovery of Cenvat credit utilized wrongly. Citing a previous case, the Tribunal held that if inputs are used in the manufacture of wholly exempted goods, the credit taken for such inputs is recoverable. The Revenue supported their argument by referring to a case upheld by the Hon'ble Supreme Court, emphasizing the recoverability of credit in such situations.

3. The judgment also considered the applicability of precedent cases in determining Cenvat credit recovery. The decision relied on the case of M/s. Albert David Ltd. v. CCE, Meerut, where the Tribunal ruled that credit taken for inputs used in wholly exempted goods is recoverable. This ruling was further supported by a Supreme Court decision. Ultimately, the Tribunal set aside the impugned order and upheld the Order-in-Original, allowing the appeal and disposing of the cross-objections filed by the respondent.

In conclusion, the judgment clarifies the treatment of Cenvat credit on inputs used in the manufacture of exempted goods, emphasizing the provisions of Rule 57AD and Rule 57AH while drawing on relevant precedent cases to support the decision.