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2016 (9) TMI 1402 - HC - Central ExciseCENVAT credit - inputs used in the manufacture of exempted goods - fuel - sub-rule (1) of Rule 57D of Central Excise Rules 1994 and sub-rule (1) of Rule 6 of the Cenvat Credit Rules 2001/2002 - Held that - the issue raised is covered against the respondent and in favour of the appellant by the decision of the Apex Court in Commnr. of Central Excise Versus M/s. Gujarat Narmada Fertilizers Co. Ltd. 2009 (8) TMI 15 - SUPREME COURT wherein it was held that Cenvat credit for duty paid on inputs used in the manufacture of exempted final products is not allowed. Notwithstanding the fact that the appellant is entitled to succeed and Annexure A4 and A6 orders passed by the appellate authority and the Tribunal are liable to be set aside the matter should go back to the original authority for the limited purpose of deciding the question whether utilizable input credit was available during the period from March 2000 to November 2002. Appeal allowed in part and part matter on remand.
Issues:
- Whether Cenvat credit on inputs used as fuel for manufacturing exempted final products is allowed under Rule 57D of Central Excise Rules, 1994 and Rule 6 of Cenvat Credit Rules, 2001/2002. Detailed Analysis: Issue 1: Cenvat Credit on Inputs Used as Fuel for Exempted Products The case involves an appeal under Section 35G of the Central Excise Act, 1944 arising from orders issued by the Commissioner of Customs and Central Excise (Appeals) and the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Bangalore. The respondent, engaged in manufacturing dutiable and non-dutiable goods, availed CENVAT credit on furnace oil/LSHS. The Deputy Commissioner held that inputs used as fuel are excluded from CENVAT credit rules, leading to a demand of ?16,98,13,555/- along with interest. The respondent appealed, and the appellate authority allowed the appeal based on a previous Tribunal decision. The Customs, Excise & Service Tax Appellate Tribunal upheld this decision. The main issue was whether CENVAT credit on inputs used as fuel for exempted products is permissible under the relevant rules. Issue 2: Interpretation of Applicable Rules During the hearing, both parties agreed that a Supreme Court decision clarified that CENVAT credit for duty paid on inputs used in manufacturing exempted final products is not allowed. The appellant argued that the appeal should be allowed based on this precedent. However, the respondent cited a Division Bench decision suggesting that if utilizable CENVAT credit was available during the relevant period, the liability to pay interest should be limited to any shortfall in input credit. The Court decided to remand the matter to the original authority to determine the availability of utilizable input credit during the relevant period. If input credit was available, the respondent would not be liable to pay interest, as it would be a belated adjustment of duty credit. If there was a shortfall, the respondent would be liable to pay interest for the default period. Conclusion The Court allowed the appeal, setting aside the previous orders, and remanded the matter to the original authority to determine the availability of utilizable input credit. The Court emphasized that if input credit was available, no interest would be payable, but if there was a shortfall, interest would be due for the default period. The Court rejected the request to exempt the appellant from paying interest during the appeal period.
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