2006 (11) TMI 537 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 6 of Cenvat Credit Rules, 2002 regarding payment obligations for manufacturers of dutiable and exempted goods.

Analysis:
The case involved a dispute regarding the interpretation of Rule 6 of the Cenvat Credit Rules, 2002. The appellants were required to pre-deposit a duty amount, penalty, and interest due to availing Cenvat credit on inputs used in the manufacture of Bulk Drugs. A portion of the bulk drugs was captively consumed for the manufacture of exempted Formulations, while the remaining portion was cleared on payment of duty. The Revenue demanded 8%/10% on the value of the Formulations cleared, but the appellants contended that they had already paid an amount based on the bulk drugs consumed for the Formulations. The key issue was whether the 8%/10% should be calculated on the value of the Formulations cleared or the Bulk Drugs used.

The appellants argued that the lower authorities did not consider relevant case laws and contended that the imposition of the 8%/10% amount on the Formulations was incorrect. They also claimed that there was no intention to suppress information or make short payments. The appellants relied on specific decisions to support their arguments and questioned the imposition of penalties under Section 11AC. The Revenue, however, maintained its position and emphasized the strength of its case on merits.

Upon careful examination of the case records and Rule 6 of the Cenvat Credit Rules, the Tribunal noted that the rule required payment of 8%/10% of the total price of the exempted final product at the time of clearance from the factory. Since the appellants did not sell the bulk drugs but transferred them internally to produce exempted Formulations that were sold, the Revenue's contention that the 8%/10% should be based on the value of the Formulations had prima facie merit. The Tribunal found the case laws cited by the appellants not directly relevant and directed the appellants to pre-deposit a specified amount within a deadline to continue the appeal process, with failure to comply leading to dismissal of the appeal.

In conclusion, the judgment clarified the payment obligations under Rule 6 of the Cenvat Credit Rules concerning manufacturers of dutiable and exempted goods. It highlighted the importance of correctly interpreting the rule in determining the amount due based on the value of the final exempted products cleared from the factory, rather than the inputs used in their production.