2008 (4) TMI 571 - AT - Central Excise

Summary

Issues involved: Interpretation of Rule 6 of the Cenvat Credit Rules regarding availment of credit for capital goods used in the manufacture of exempted products.

Summary:
The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mangalore. The case involved M/s. Rajashri Packages Ltd., engaged in manufacturing refined vegetable oil and vanaspati, with certain by-products cleared on payment of duty. The dispute arose over the availment of Cenvat credit for capital goods used in the plant producing vanaspati, which is exempted from Excise duty. The Revenue contended that no credit should be available for goods exclusively used in the manufacture of exempted products as per Rule 6 of the Cenvat Credit Rules. However, the Commissioner (Appeals) ruled in favor of the Respondents, stating that credit can be availed as long as the new plant is connected to the process producing edible goods at any stage.

The Advocate for the Respondents argued that the manufacturing process is integrated, and the goods in question are not exclusively used for exempted products. Reference was made to a Tribunal decision supporting the entitlement to Cenvat credit in similar cases. On the other hand, the Revenue argued that the new plant producing only exempted vanaspati should not qualify for credit under Rule 6. After careful consideration, the Judge found that the new plant, though connected to the old one, should be viewed as a whole unit. Since the entire process is integrated and various by-products are cleared on duty payment, it was concluded that the capital goods were not exclusively used for exempted goods. The Judge relied on a previous decision by the Chennai Bench, affirming the legality of the Commissioner (Appeals) decision and rejecting the Department's appeal.