2012 (5) TMI 326 - AT - Central Excise

Manufacturing of textile products - Cenvat Credit - Notification No. 29/04-CE and Notification No. 30/04-CE whereas the notification No. 29/04-CE permitted concessional rate of duty subject to availment of modvat credit Notification 30/2004-CE allowed unconditional exemption. - held that - Merely because during the relevant period when the capital goods were received in their factory there were no clearance by availing the benefit of Notification No. 29/04 will not make their final product as fully exempted. - benefit of cenvat credit allowed.

Summary

Issues:
Availment of modvat credit under Notification No. 29/04-CE and unconditional exemption under Notification No. 30/04-CE for textile goods manufacture. Dispute regarding credit availability for capital goods under Rule 6(4) of Cenvat Credit Rules due to final product exemption. Applicability of Rule 6(4) when capital goods are exclusively used in exempted final product manufacturing.

Analysis:
The appellants were manufacturing textile goods and utilizing both Notification No. 29/04-CE for concessional duty with modvat credit and Notification No. 30/04-CE for unconditional exemption. The issue arose when the appellants only availed the benefit of Notification No. 30/04 during specific periods, receiving cenvatable capital goods for which they claimed credit. The revenue contended that credit was not available due to final product exemption under Rule 6(4) of Cenvat Credit Rules. However, the appellants argued that their final product was not unconditionally exempted as they were also clearing products under Notification 29/04. The Tribunal noted that denial of credit under Rule 6(4) applies only when capital goods are exclusively used in manufacturing exempted final products.

In this case, the appellants' final product was not fully exempted as they were also benefiting from Notification No. 29/04, allowing clearance at a concessional rate after modvat credit. Therefore, the final product was not exclusively exempted, making them eligible for credit. The Tribunal referenced a similar case, S.T. Cottex Exports Pvt. Ltd. vs. CCE, Chandigarh, where Cenvat credit was allowed for a comparable situation. Additionally, decisions from the Hon'ble High Court of Punjab & Haryana and another Tribunal case supported the allowance of credit in such scenarios.

The Tribunal found that relying on the Larger Bench decision in the case of Spenta International Ltd. was not appropriate as the facts differed from the current case. Consequently, the Tribunal set aside the impugned orders of the authorities below, allowing the appeals and granting consequential relief to the appellants.