2012 (12) TMI 796 - AT - Central Excise

Reversal of Credit proportionate to the inputs used in or in relation to the manufacture of the exempted goods - Held that - The applicants are procuring iron ore and metallurgical coke and only screening the same and during the process of screening the iron ore fine and coke breeze come into existence which is not fit for use in the manufacture of pig iron and the same are being cleared without payment of duty. As the provisions of Rule 6 of the Cenvat Credit Rules are amended retrospectively and the manufacture has to reverse the credit proportionate to the inputs used in or in relation to the manufacture of the exempted goods, the applicants are directed to deposit Rs. 8,00,000/- within six weeks.

Summary

Issues:
1. Application for waiver of pre-deposit of duty and interest.
2. Liability of the applicants to pay 5%/10% of the price of exempted goods.
3. Interpretation of Rule 6 of the Cenvat Credit Rules.
4. Applicability of retrospective amendment to Rule 6.
5. Direction for deposit and waiver of pre-deposit.

Analysis:

1. The applicant sought waiver of pre-deposit of duty amounting to Rs.2,47,30,827/- along with interest. The dispute arose from the clearance of iron ore fines and coke breezes without payment of duty, with the Revenue contending that applicants, engaged in pig iron manufacturing, were liable to pay 5%/10% of the price of exempted goods due to lack of separate records for common inputs.

2. The applicants argued that since the main raw materials, iron ore, and metallurgical cokes were not dutiable, no credit had been availed in this regard. They claimed only availing Cenvat Credit for Service tax on GTA services, with total credit related to iron ore fines and coke breeze approximately Rs. 8.00 lakhs. The Revenue, however, insisted on the payment citing Rule 6 of the Cenvat Credit Rules.

3. The crux of the matter lay in the interpretation of Rule 6 of the Cenvat Credit Rules, where the applicants contended that the retrospective amendment to the rule necessitated the reversal of credit proportionate to exempted goods used in manufacturing. This argument formed a critical aspect of the case, impacting the liability of the applicants.

4. Considering the retrospective amendment and the nature of goods being cleared without duty payment, the Tribunal directed the applicants to deposit Rs. 8,00,000/- within six weeks. This deposit was linked to the reversal of credit proportionate to inputs used in manufacturing exempted goods. The Tribunal further waived the pre-deposit of the remaining duty, with recovery stayed during the appeal's pendency.

5. The compliance deadline for the deposit was set for 06.09.2012, ensuring that the applicants adhered to the Tribunal's directive. The judgment encapsulated a nuanced analysis of the waiver application, liability determination, retrospective rule amendment implications, and the subsequent direction for deposit and pre-deposit waiver, providing a comprehensive resolution to the contentious issues at hand.