2009 (4) TMI 665 - AT - Central Excise

Summary

Issues:
1. Admissibility of Cenvat credit on furnace oil used in manufacturing exempted goods.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner (Appeals) rejecting the Department's appeal. The respondents were engaged in manufacturing S.S. Patta/Patti classifiable under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. The issue revolved around the availing of Cenvat credit amounting to Rs. 30,148/- on furnace oil used in the process of manufacturing hot rolling products, which were exempted goods. The Revenue alleged that the credit was inadmissible as per Rule 6(1) of the Cenvat Credit Rules, 2002/2004. A show cause notice was issued proposing to disallow the credit and impose a penalty. The Original Authority dropped the proceedings, leading the Revenue to file an appeal before the Commissioner (Appeals), which was also rejected, prompting the Revenue to file the current appeal.

The Respondent's Chartered Accountant referred to a judgment by the Hon'ble Gujarat High Court and a subsequent decision by the Larger Bench of the Tribunal in support of their argument. The Chartered Accountant highlighted that a notification amending Rule 6(2) of the Cenvat Credit Rules had been issued, which omitted the words "except inputs intended to be used as fuel." The Tribunal found merit in the Chartered Accountant's submission, citing the Gujarat High Court's decision that fuel used in manufacturing fertilizers and generating steam for electricity production in a captive power plant, along with inputs used within the plant, should not be denied credit. The Larger Bench also affirmed that inputs used as fuel, excluded from Rule 6, were eligible for credit. The Tribunal noted that the specific provision inserted by the notification made the duty demand prior to 16-5-2005 unsustainable. Consequently, the Tribunal upheld the Commissioner (Appeals) order, rejecting the Revenue's appeal.

In conclusion, the Tribunal dismissed the Revenue's appeal, emphasizing the inadmissibility of Cenvat credit on furnace oil used in the manufacturing process of exempted goods prior to the relevant amendment in Rule 6(2) of the Cenvat Credit Rules. The decision was based on legal precedents and the specific provisions introduced through a notification, which clarified the eligibility of credit for inputs used as fuel.