2008 (5) TMI 500 - AT - Central Excise

Summary

Issues: Interpretation of Rule 6 of CENVAT Credit Rules, 2002 in relation to manufacturing final products and availing exemptions.

Summary:
The case involved M/s. Magtorq (P) Ltd. (MPL) availing exemption under Notification No. 10/97 dated 16-3-97 for gear boxes they manufactured. The department demanded an amount under Rule 6(3)(b) of the CENVAT Credit Rules, 2002 (CCR) for a consignment cleared by MPL. The Commissioner (Appeals) found that Rule 6 of CCR applies when an assessee manufactures final products chargeable to duty and exempted from duty. As MPL only manufactured gear boxes, the rule did not apply to demand an amount at the rate of 8% of the value of exempted goods. The Revenue appealed, arguing that MPL should pay the amount as per Rule 6(3)(b) to avoid unintended benefits. However, the Tribunal upheld the Commissioner's decision based on the interpretation of the rule in a previous case.

The Tribunal noted that MPL only manufactured one category of final product, gear boxes, using common inputs. Referring to the previous case, the Tribunal reiterated that Rule 6 of CCR applies to manufacturers producing final products subject to duty and exempted from duty. Since MPL did not manufacture two different final products, one being exempt, they were not required to pay any amount based on the sale price of exempted gear boxes. The CENVAT scheme aims to prevent duty payment on inputs used in exempted final products, and MPL had already reversed the credit related to inputs used in the consignment in question. Therefore, the Tribunal dismissed the Revenue's appeal, upholding the Commissioner's decision based on the Tribunal's previous ruling.

*(Dictated and pronounced in open court)*