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2011 (4) TMI 327 - AT - Central ExciseDemand - Notification No. 214/86-C.E., dated 25-3-86 - Rule 4(6) of Cenvat Credit Rules, 2004 - As per the facts available the assessee are not manufacturing exclusively exempted goods and obviously the cenvat credit of capital goods will be available to them - Apex Court in the case of CCE v. Hindustan Sanitaryware & Industries, (2002 -TMI - 46329 - SUPREME COURT OF INDIA), wherein in respect of this very notification, this Court has held that so long as duty is paid on the final product, the mere fact that duty was not paid on the intermediate product would not disentitle the manufacturer from the benefit of Notification No. 217/86-C.E., dated 2-4-1986 - Decided in favour of the assessee
Issues:
- Disallowance of cenvat credit on capital goods used in the manufacture of exempted goods under Cenvat Credit Rules, 2004. - Interpretation of Notification No. 214/86-C.E. regarding job work basis and exemption eligibility. - Application of Rule 4(6) of Cenvat Credit Rules, 2004 in relation to capital goods exclusively used in the manufacture of exempted goods. - Comparison of various case laws supporting the assessee's argument against the Revenue's contention. Analysis: 1. The appeal involved a dispute over the disallowance of cenvat credit by the Revenue based on Sub-Rule 4(6) of the Cenvat Credit Rules, 2004. The appellant, a manufacturing unit, received goods for machining on a job work basis under Notification No. 214/86-C.E. without paying duty. The Revenue contended that since no duty was paid, cenvat credit on capital goods used in the process should be disallowed. 2. The crux of the issue was the interpretation of the term "exempted goods" under Rule 4(6) of the Cenvat Credit Rules, 2004 and Notification No. 214/86-C.E. The appellant argued that the goods in question were not exclusively exempted but were part of job work manufacturing process, making them eligible for cenvat credit. They cited various case laws supporting their stance, emphasizing the distinction between goods exempted under different provisions. 3. Rule 4(6) of the Cenvat Credit Rules, 2004 explicitly states that no cenvat credit shall be allowed on capital goods exclusively used in the manufacture of exempted goods. However, the Tribunal differentiated between the exemption under Rule 4(6) and the one under Notification No. 214/86, highlighting that the appellant was not manufacturing exclusively exempted goods, thus making them eligible for cenvat credit on capital goods. 4. The Tribunal's decision was influenced by previous judgments, including the Apex Court's ruling in Escorts Ltd., which supported the appellant's right to claim cenvat credit on inputs used in manufacturing final products cleared without duty payment. The Tribunal also clarified the significance of the term "exclusively" in Rule 4(6), emphasizing that capital goods should not have been used at all in the manufacture of dutiable goods to be denied credit. 5. Ultimately, the Tribunal upheld the appellant's claim for cenvat credit on capital goods, considering their job work activities under Notification No. 214/86. The decision was further supported by legal precedents, including the Apex Court's ruling related to Notification No. 217/86-C.E., reinforcing the principle that duty payment on final products sufficed for exemption eligibility. The appeal filed by the Revenue was disallowed based on the facts and legal interpretations presented. This detailed analysis of the judgment provides a comprehensive overview of the issues addressed and the Tribunal's reasoning behind the decision.
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