2008 (6) TMI 503 - AT - Central Excise

Cenvat/Modvat credit - manufacture of dutiable as well as non-dutiable goods - non-maintenance of separate set of books - Rule 6(3)(b) of the Cenvat Credit Rules, 2002

Summary

Issues:
1. Demand related to the reversal of credit on common inputs used for manufacturing exempted coke and the demand under Rule 6 on coke cleared to sister units.
2. Demand of duty on clearance of exempted products due to the transfer of common inputs to a subsidiary company and subsequent sale back to the appellant.

Analysis:

Issue 1:
The first issue pertains to the demand raised on the reversal of credit on common inputs used for manufacturing exempted coke and the demand under Rule 6 on coke cleared to sister units. The appellant, an integrated steel plant, reversed the credit on inputs attributable to exempted coke after authorities' investigation. The demand under Rule 6 amounted to about Rs. 15.25 crores. The learned advocate argued that since the proportional credit was reversed, the demand is not sustainable. Reference was made to a similar issue pending before the Larger Bench in the case of M/s. Nicholas Piramal (India) Ltd. The Tribunal noted the arguments and referred the matter to the Larger Bench for clarification.

Issue 2:
The second issue concerns the demand of duty on clearance of exempted products due to the transfer of common inputs to a subsidiary company and subsequent sale back to the appellant. The appellant had a captive power plant within the factory premises, which was transferred to a subsidiary company. The authorities demanded duty on the clearance of exempted products, which was contested by the appellant. The learned advocate argued that the power plant remained a captive plant even after the transfer. The Tribunal observed conflicting decisions on similar cases and referred the appeal to the Larger Bench for clarification on whether the power plant could still be considered a captive power plant post-transfer. The Tribunal also highlighted the availability of Modvat credit on capital goods used outside the factory premises based on relevant legal precedents.

In conclusion, the Tribunal referred both issues to the Larger Bench for further clarification and stayed the recovery of duty and penalty pending the decision. The Tribunal acknowledged the similarity of the issues with another case pending before the Larger Bench and directed both cases to be listed together for further proceedings.