2015 (8) TMI 1344 - AT - Central Excise

CENVAT credit - manufacture of Printed Plastic Laminates, other Laminated Plastic Pouches, Printed Polypeline Labels etc., falling under Chapter Sub-heading Nos. 39202020, 39239090 and 39269026 repectively of the Central Excise Tariff Act, 1985 - whether the denial of CENVAT credit on the ground that printed plastic laminates are not arising out of any manufacturing process, and as such, duty was not payable on the said product, is justified? - Held that - The obligation of manufacturer of dutiable and exempted goods is contained in Rule 6 of the Cenvat Credit Rules, 2004. The said Rule is applicable only when both dutiable as well as exempted goods are manufactured in the factory of the manufacturer. In the present case, printed plastic laminates manufactured by the appellant is not confirming to the definition of exempted goods as per the definition contained in Rule 2(d) of the said Rules. Since the appellant is engaged only in the manufacture of dutiable goods, I am of the view that the embargo created in Rule 6 of the said Rules regarding payment of 10% of the price of exempted goods shall not be applicable and as such, the duty demand confirmed by the authorities below are not justified - since printed plastic laminates cannot be considered as exempted goods, I am of the considered view that the inputs used in or in relation to manufacture of such exempted product is eligible for the cenvat benefit and the embargo/ stipulation created in Rule 6 of the said Rules will have no application and as such, the appellant is not required to reverse 10% of the total price of printed plastic laminates removed from the factory. Denial of credit not justified - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
- Dispute over availing cenvat credit of Central Excise duty on printed plastic laminates
- Interpretation of Rule 6 of the Cenvat Credit Rules, 2004
- Applicability of duty demand on exempted goods
- Legal sanctity of printed plastic laminates as excisable goods
- Reversal of cenvat credit on inputs used in manufacturing printed plastic laminates
- Requirement to pay 10% of the total price of exempted final product

Analysis:
1. Cenvat Credit Dispute: The appellant, engaged in manufacturing various products falling under specific sub-headings, availed cenvat credit of Central Excise duty on inputs used in manufacturing final products. The Central Excise Department disputed the cenvat credit claiming that printed plastic laminates, one of the products, did not arise from a manufacturing process, questioning the duty payment on the product.

2. Interpretation of Rule 6: The dispute primarily revolved around the interpretation of Rule 6 of the Cenvat Credit Rules, 2004, which mandates the payment of 10% of the total price of exempted final products when both dutiable and exempted goods are manufactured. The appellant argued that since printed plastic laminates were not categorized as excisable goods, Rule 6 should not apply to demand duty payment on them.

3. Legal Sanctity of Goods: The Tribunal analyzed whether printed plastic laminates qualified as exempted goods under Rule 2(d) of the Rules. It was concluded that since the appellant solely manufactured dutiable goods and printed plastic laminates did not fit the definition of exempted goods, the duty demand based on Rule 6 was deemed unjustified.

4. Cenvat Credit Reversal: The Department contended that since printed plastic laminates were not considered to arise from a manufacturing process, the appellant should reverse cenvat credit on inputs used for manufacturing them. However, the Tribunal found this argument lacking legal basis as printed plastic laminates were not classified as exempted excisable goods.

5. Applicability of Rule 6: The Tribunal clarified that the inputs used in manufacturing other excisable goods by the appellant, even if partially used for printed plastic laminates, were eligible for cenvat credit. Consequently, the Rule 6 stipulation of paying 10% on the removal of printed plastic laminates was deemed inapplicable due to the non-exempt status of the product.

6. Judgment: Ultimately, the Tribunal ruled in favor of the appellant, setting aside the impugned order disallowing the cenvat credit benefit. The decision highlighted that the appellant was not obligated to reverse 10% of the total price of printed plastic laminates, emphasizing the inapplicability of Rule 6 in this context.