2007 (11) TMI 505 - AT - Central Excise

Summary

Issues:
Reversal of credit on inputs used in exempted final product lost as per statutory return.

Analysis:
The case involved the appellant, engaged in manufacturing dutiable and exempted commodities, availing Cenvat credit on molasses used in production. The appellant reversed credit on molasses used in manufacturing exempted final product but did not reverse credit on inputs lost during the process, leading to a demand of duty. The Commissioner (Appeals) upheld the demand, prompting the appellant to appeal. The issue revolved around the reversal of credit on inputs lost during manufacturing, as per Rule 6(3)(a) of Cenvat Credit Rules, 2002.

The appellant argued that similar issues had been decided in previous cases like CCE v. IPF Vikram India Ltd. and CCE v. Hydrogas Plg (I) Pvt. Ltd., citing these precedents in their defense. However, the Authorized Representative for the respondent contended that these cases were not directly applicable as they pertained to dutiable final products destroyed in fire/accident, unlike the present scenario involving exempted final products. The respondent emphasized Rule 6(1) of the Cenvat Credit Rules, prohibiting the use of dutiable inputs in manufacturing exempted final products.

Upon examination, it was found that the appellant failed to reverse the credit on molasses used in manufacturing exempted final products, despite losses as per statutory returns. The appellant claimed that the exempted final product was intended for dutiable goods, justifying the non-reversal of credit. However, the tribunal rejected this argument, stating that Rule 6 of the Cenvat Credit Rules did not support such a claim. The tribunal ruled that the appellant must reverse the credit on inputs used in manufacturing exempted final products as lost, as they were not entitled to avail credit on inputs used for exempted goods. Consequently, the appeal was dismissed.

In conclusion, the tribunal upheld the demand for duty, emphasizing the inapplicability of previous case laws cited by the appellant and highlighting the provisions of Rule 6 of the Cenvat Credit Rules regarding the reversal of credit on inputs used in manufacturing exempted final products.