2009 (1) TMI 773 - AT - Central Excise

Summary

Issues involved:
The issue involves availing Cenvat credit on inputs common for exempted and dutiable products, applicability of Rule 6(3)(b) of the Cenvat Credit Rules, 2002, reversal of input credit for exempted final product, interpretation of Tribunal decisions, and compliance with Rule 6 provisions.

Summary:

1. Availing Cenvat Credit:
The appellants, engaged in manufacturing dutiable and exempted products, faced allegations of availing Cenvat credit on common inputs without maintaining separate inventory. The original adjudicating authority confirmed the demand and imposed a penalty, which was upheld by the Commissioner (Appeals), leading to the present appeal.

2. Reversal of Input Credit:
The appellants contended that they had reversed the input credit for exempted final products, which was acknowledged by the lower authority. However, the benefit was not extended citing Rule 6 restrictions. Reference was made to a Larger Bench decision and a Gujarat High Court ruling to support the reversal at the time of clearance.

3. Commissioner (Appeals) Order:
The Commissioner (Appeals) noted the reversal of Cenvat credit by the appellants for inputs used in exempted goods, acknowledging the practical challenges of maintaining separate inventories. However, it was held that Rule 6 did not permit such reversal, emphasizing the options available under the rule for compliance.

4. Tribunal Decision and High Court Ruling:
The Tribunal's Larger Bench decision clarified that payment of 8% under Rule 6 was not necessary if the credit attributable to exempted goods was paid before removal. The absence of dispute regarding the reversal of MODVAT credit led to the rejection of the demand. A Gujarat High Court decision supported the appellants' stance on input credit calculation and reversal.

5. Conclusion:
The Tribunal found no justification to uphold the demand, setting aside the impugned orders and allowing both appeals with consequential relief to the appellants.