2013 (4) TMI 80 - AT - Central Excise

Cenvat Credit on inputs used in manufacture of exempted final products - Held that - In this case, the Cenvat credit availed inputs in process had been used in the manufacture of finished products, which were exempted goods, as the same had been cleared at nil rate of duty under Notification No. 23/2004-C.E. Thus, in this case, the Cenvat credit availed inputs in process and inputs contained in the final products lying in stock had been used in the manufacture of exempted goods and, therefore, the provisions of Rule 6(1) would be attracted and the Cenvat credit would not be admissible and since the same had been availed and same would be required to be reversed. - As discussed above, the judgment of Larger Bench in the case of H.M.T. v. CCE (2008 (10) TMI 54 - CESTAT, NEW DELHI) is of the period prior to the judgment of the Apex Court in the case of the Apex Court in the case of Commissioner of Central Excise v. Gujarat Narmada Fertilizers Co. Ltd. reported in 2009 (8) TMI 15 - SUPREME COURT in the light of which, the same would be no longer be a good law. - Decided against the assessee.

Summary

Issues:
Interpretation of Rule 6(1) of the Cenvat Credit Rules, 2002 regarding reversal of Cenvat credit on inputs used in manufacturing exempted goods.

Analysis:
The appellant manufactured dutiable products until fully exempted from duty by Notification No. 23/2004-C.E. The issue revolved around the reversal of Cenvat credit on inputs used in manufacturing exempted goods as per Rule 6(1) of the Cenvat Credit Rules, 2002. The appellant reversed credit on inputs in stock but not on inputs in process or final products. The Department issued a show cause notice for recovery based on Rule 6(1) provisions. The Asstt. Commissioner confirmed the demand, imposing interest and penalty. On appeal, the Commissioner upheld the decision, except for setting aside the penalty under Rule 13 of the Cenvat Credit Rules, leading to the current appeal.

The appellant argued citing the HMT Ltd. case, where the Tribunal held that Cenvat credit need not be reversed on inputs used in manufacturing exempted goods. The Departmental Representative relied on the Ranbaxy Laboratories Ltd. case, stating credit reversal was necessary. The Tribunal analyzed the legal provisions and judgments, emphasizing Rule 6(1) of the Cenvat Credit Rules, 2002. It highlighted the definition of exempted goods and the principles behind Cenvat credit availment and reversal. Referring to the Apex Court's judgment in the Gujarat Narmada Fertilizers case, it clarified that Cenvat credit is not permissible on inputs used in manufacturing exempted goods.

The Tribunal differentiated the HMT Ltd. judgment, stating it was rendered before the Gujarat Narmada Fertilizers case and was no longer valid law. It explained the implications of allowing Cenvat credit on inputs used in exempted goods manufacturing, emphasizing the structure and principles of the Cenvat scheme. The Tribunal dismissed the appeal, stating that the appellant's inputs in process and final products were used in manufacturing exempted goods, necessitating the reversal of Cenvat credit as per Rule 6(1) provisions. The judgment highlighted the importance of adhering to the Cenvat credit rules and the legal principles governing credit availment in the manufacturing of exempted goods.

Overall, the Tribunal's decision was based on a thorough analysis of the legal provisions, relevant judgments, and the specific circumstances of the case, ensuring compliance with the Cenvat Credit Rules and upholding the principle that Cenvat credit on inputs used in manufacturing exempted goods must be reversed as per Rule 6(1) requirements.