2006 (6) TMI 455 - AT - Central Excise

Summary

Issues: Exemption under Notification No. 6/2002-C.E., reversal of credit under Rule 9(2) of Cenvat Credit Rules, 2002, demand of credit under Rule 12 of CCR, interest imposition, penalty under Rule 13 of CCR.

Exemption under Notification No. 6/2002-C.E.: The appellant, a paper manufacturer, availed exemption under Notification No. 6/2002-C.E. for certain clearances. However, the original authority found that the appellant had not reversed the credit relatable to inputs and inputs contained in final products as required under Rule 9(2) of Cenvat Credit Rules, 2002. The demand for credit under Rule 12 of CCR was made, along with interest and a penalty. The Commissioner upheld the original authority's order, leading to the appeal.

Reversal of Credit under Rule 9(2) of Cenvat Credit Rules, 2002: The appellant argued that Rule 9(2) applied only to units opting for exemption for all final products, which was not the case for them. They maintained the input credit balance related to finished products covered by the exemption and did not avail input credit for exempted goods. The appellant contended that they fulfilled the requirement of not using credit availed inputs in the manufacture of exempted goods, as per Notification No. 6/2002-C.E.

Demand of Credit under Rule 12 of CCR, Interest Imposition, and Penalty under Rule 13 of CCR: The Tribunal considered precedents where similar issues were addressed. In one case, it was held that the reversal of credit in stock when availing exemption was unnecessary if the credit on inputs used in exempted final products was not availed. The Tribunal also cited a High Court judgment upholding this decision. After analyzing the arguments and evidence, the Tribunal concluded that the appellant had not used credit availed inputs in the manufacture of exempted final products. Therefore, the impugned order was deemed incorrect, vacated, and the appeal was allowed.

This judgment highlights the importance of compliance with Cenvat Credit Rules when availing exemptions and the necessity to demonstrate that credit availed inputs were not used in the manufacture of exempted goods. The Tribunal's decision was based on the specific circumstances of the case and interpretations of relevant rules and precedents, ultimately leading to the allowance of the appeal.