2011 (8) TMI 56 - HC - Central Excise

Reversal of Cenvat credit - Rule 6(3)(b) of the Cenvat Credit Rules - assessee had not opted to maintain separate accounts of manufacture of dutiable and exempted goods and was, therefore, required to pay 10% of the total sale price of the exempted final product as duty - assessee had not availed any Cenvat Credit on Hydrochloric Acid for the manufacture of Gluten. Similarly no benefit of Cenvat Credit had been taken by the assessee on Bleaching Earth (which had produced Spent Earth) and on Activated Carbon (which had produced Spent Carbon) - Cenvat Credit availed on 15.7.2004 was reversed during the same month and further no Cenvat Credit on Hydrochloric acid was availed from 8/2004 to 12/2004 - Appeal is dismissed

Summary

Issues:
Delay in refiling the appeal condoned; Interpretation of Rule 6(3)(b) of the Cenvat Credit Rules regarding reversal of Cenvat Credit for exempted finished products; Availing and reversal of Cenvat Credit on specific inputs; Adjudication of liability to pay duty on exempted final products; Appeal against the order of the Commissioner (Appeals) challenging the dropping of demand.

Delay in Refiling the Appeal:
The judgment begins by condoning the delay in refiling the appeal. The appeal is filed by the revenue under Section 35G of the Central Excise Act against the order of the Tribunal. The substantial question of law raised in the appeal pertains to the interpretation of Rule 6(3)(b) of the Cenvat Credit Rules regarding the requirement to reverse Cenvat Credit for exempted finished products. The facts of the case involve an assessee engaged in the manufacture of various products, including exempted by-products generated during the manufacturing process. The issue revolves around the requirement to reverse an amount equal to a percentage of the sale price of these exempted by-products at the time of clearance.

Interpretation of Rule 6(3)(b) of the Cenvat Credit Rules:
The judgment discusses the specific inputs used in the manufacturing process, such as Hydrochloric Acid, Bleaching Earth, and Activated Carbon, for generating exempted by-products. The adjudicating authority noted that the assessee did not avail Cenvat Credit on certain inputs, and the Range Officer certified this fact. The Commissioner (Appeals) and the Tribunal affirmed this finding, stating that no Cenvat Credit was availed on Hydrochloric Acid and that the Cenvat Credit taken on a specific date was reversed in the same month. The Tribunal further confirmed that no Cenvat Credit was availed on Hydrochloric acid for a specific period. The judgment emphasizes that the findings regarding the non-availment of Cenvat Credit have not been proven erroneous or perverse, leading to the dismissal of the appeal.

Adjudication of Liability and Appeal Against Dropping of Demand:
The judgment details the proceedings where the department issued a show cause notice for recovery of an amount concerning the clearance of exempted by-products. The Assistant Commissioner initially dropped part of the demand, which was accepted by the department. However, the department challenged the dropping of the remaining amount in appeal before the Commissioner (Appeals). The Commissioner (Appeals) dismissed the appeal, and the Tribunal upheld this decision. The High Court, after considering the findings and lack of perversity in the lower authorities' decisions, concluded that no substantial question of law arose in the appeal, leading to its dismissal.