2006 (9) TMI 456 - AT - Central Excise

Summary

Issues:
1. Contravention of Rule 6 of Cenvat Credit Rules, 2002 regarding the utilization of credit on inputs used in the manufacture of exempted final goods.
2. Demand of irregularly availed Cenvat credit, penalty imposition, and interest recovery.
3. Interpretation of Rule 57C(1) and Rule 57C(2) in relation to manufacturer obligations and credit availed on inputs.

Issue 1: Contravention of Rule 6 of Cenvat Credit Rules, 2002
The Appellants were found to have contravened Sub-rule (1) of Rule 6 of Cenvat Credit Rules, 2002 by taking credit on inputs exclusively used in the manufacture of exempted final goods and utilizing this credit towards the payment of duty on other final products. A Show Cause Notice was issued demanding the reversal of irregularly availed Cenvat credit amounting to Rs. 4,45,908/- up to December 2003. The Appellants argued that similar issues had been decided in their favor in previous cases, citing specific Final Orders. They contended that they were not required to reverse the credit, making the demands unsustainable.

Issue 2: Demand of Cenvat Credit, Penalty, and Interest
The demand raised in the Show Cause Notice included the recovery of irregularly availed Cenvat credit, penalty imposition under Rule 13 of Cenvat Credit Rules, 2002, and interest recovery under Rule 12 of the Cenvat Credit Rules, 2002. The Appellants relied on previous Final Orders to support their argument that they were not obligated to reverse the credit, thus challenging the validity of the demands made by the authorities.

Issue 3: Interpretation of Rule 57C(1) and Rule 57C(2)
The Tribunal analyzed previous Final Orders and the provisions of Rule 57C(1) and Rule 57C(2) to determine the obligations of manufacturers regarding credit availed on inputs used in the manufacture of exempted final products. The Tribunal emphasized that compliance with Rule 57C(1) was linked to the payment of 8% of the sale price of the exempted final product, absolving the manufacturer from certain requirements. The Tribunal clarified that the payment of 8% under Rule 57CC(1) ensured compliance with Rule 57C(1) on all inputs used in the manufacture of exempted final products, including exclusive and common inputs. Relying on previous rulings, the Tribunal set aside the impugned order and allowed the appeal based on the interpretation of the relevant rules.

This detailed analysis of the legal judgment provides insights into the issues addressed, the arguments presented, and the Tribunal's interpretation of the relevant rules and precedents.