2009 (11) TMI 698 - AT - Central Excise

Summary

Issues:
Cenvat credit reversal on furnace oil used in manufacturing Rough Steel Forgings cleared without duty; Classification of finished goods as exempted goods; Utilization of Cenvat credit for payment of duty on waste and scrap; Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004.

Analysis:
The judgment deals with the issue of Cenvat credit reversal amounting to Rs. 1,43,298/- taken by the assessees for manufacturing Rough Steel Forgings cleared without payment of duty to sister units. The Tribunal directed the reversal of credit on the grounds that the forged steel was considered exempted goods and that waste and scrap generated during the manufacturing process were not considered as a result of manufacture. Additionally, a penalty of Rs. 10,000/- was imposed on the assessees under Rule 15 of the Cenvat Credit Rules, 2004.

In the case of Sterlite Industries (I) Ltd. v. CCE, Pune, the Larger Bench of the Tribunal held that finished goods cleared without payment of duty under certain notifications cannot be classified as exempted goods. Based on this precedent, the judge in the present case ruled that the assessees were not obligated to reverse the Cenvat credit taken on furnace oil used in manufacturing Rough Steel Forgings cleared without duty. Furthermore, referring to a circular issued by the CBEC, it was clarified that Cenvat credit could be utilized for the payment of duty on waste and scrap since they were considered final products within the defined rule.

Consequently, the judge set aside the impugned order and allowed the appeal, indicating that the assessees were not required to reverse the credit for payment of duty on waste and scrap. The operative part of the order was pronounced in open court on 20-11-2009, thereby concluding the matter in favor of the appellants.