2008 (8) TMI 674 - AT - Central Excise

Summary

Issues:
1. Waiver of pre-deposit of duty and penalty for the manufacture of Barley Malt.
2. Interpretation of Rule 6 of Cenvat Credit Rules 2002 regarding common inputs for excisable and non-excisable goods.
3. Applicability of Cenvat credit in respect of input services used for dutiable and exempted goods.

Analysis:
The applicant sought a waiver of pre-deposit of duty and penalty amounting to Rs. 2,17,512/- each for manufacturing Barley Malt. The dispute arose when the revenue demanded duty on Malt Roots, considered agricultural waste, at 10% due to the use of common inputs for excisable and non-excisable goods. The applicant argued that Rule 6 of Cenvat Credit Rules 2002 does not apply to inputs intended for use as fuel, like furnace oil used until July 2002. Additionally, the applicant started using polythene bags for packing Barley Malt from November 2005, which were not used for Malt Roots. The applicant relied on CBEC Central Excise manual instructions to support their case.

The revenue contended that besides availing Cenvat credit for furnace oil and packing bags, the applicant also claimed credit for input services used in manufacturing both dutiable and exempted goods, making them liable to pay 10% of the value of exempted goods. However, the tribunal found that the Malt Roots were cleared as waste during the manufacture of Barley Malt. While Malt was subject to duty, Malt Roots were duty-free. According to sub-Rule (3) of Rule 6 of Cenvat Credit Rules, the applicants were required to pay 10% on the value of Malt Roots. Nevertheless, considering that Malt Roots were waste products and the CBEC manual allowed credit for inputs in waste or by-products, the tribunal concluded that the applicant had a strong case. Consequently, the pre-deposit of duty and penalties were waived, and the stay petition was allowed.

In conclusion, the tribunal ruled in favor of the applicant, granting a waiver of pre-deposit of duty and penalty based on the interpretation of Rule 6 of Cenvat Credit Rules 2002 and the specific circumstances surrounding the manufacturing process of Barley Malt and Malt Roots.