2013 (4) TMI 500 - AT - Central Excise

Cenvat Credit - manufacture of dutiable and exempted goods - Rule 6 - demand of amount @10% on exempted goods - held that - There is no dispute about the fact that in respect of clearances of plastic granules to their Halol unit, the appellant have paid duty @ 16% adv. Even if the Revenue s contention is accepted and the goods are treated as fully exempt from duty under Notification No. 4/2006-C.E. (Sl. No. 78) and, hence, exempted goods within the meaning of this term as defined under Rule 2(d) of Cenvat Credit Rules, 2004 and on this basis an amount equal to 10% of the value of the exempted goods is held as payable in respect of clearances of the reprocessed granules, this amount would be adjustable against the amount already paid towards duty, which is much more than the amount demanded under Rule 6(3)(i) of the Cenvat Credit Rules, 2004. Tribunal in the case of CCE v. Yamuna Gases & Chemicals Ltd. (2011 (7) TMI 984 - CESTAT, NEW DELHI) has held that such adjustment is permissible. - Stay granted.

Summary

Issues:
- Interpretation of Notification No. 4/2006-C.E. (Sl. No. 78) regarding exemption of reprocessed plastic granules from duty
- Applicability of Rule 6(3)(i) of Cenvat Credit Rules, 2004 on payment of duty for reprocessed granules
- Adjustment of duty paid against amount demanded under Rule 6(3)(i)
- Prima facie case for waiver of pre-deposit of duty, interest, and penalty

Interpretation of Notification No. 4/2006-C.E. (Sl. No. 78):
The appellant manufactured shoelasts from plastic granules, availing Cenvat credit for inputs used. Reprocessed plastic granules were cleared to another unit, Halol, Gujarat, with duty paid. The department contended that reprocessed granules were unconditionally exempt under the notification, treating duty paid as a deposit. A show cause notice was issued for recovery, deposit treatment, and penalty. The Joint Commissioner dropped the proceedings, but the department appealed, leading to the current appeal.

Applicability of Rule 6(3)(i) of Cenvat Credit Rules, 2004:
The Commissioner (Appeals) set aside the Joint Commissioner's order, reinstating the department's view. The appellant argued that the exemption was not unconditional, thus duty was correctly paid. They claimed reprocessed granules did not qualify as exempted goods under Rule 6(3)(i). The appellant cited a Tribunal judgment allowing adjustment of duty paid against the demanded amount. They argued for a waiver of pre-deposit due to a revenue-neutral situation.

Adjustment of duty paid under Rule 6(3)(i):
The Tribunal acknowledged the duty paid on reprocessed granules but considered the possibility of treating them as fully exempt goods under the notification. Even if 10% of the value was held payable, it could be adjusted against the duty already paid, as per the Tribunal's precedent. The appellant's prima facie case favored waiver of pre-deposit, as the amount demanded was less than the duty paid, ensuring a revenue-neutral outcome.

In conclusion, the Tribunal allowed the stay application, waiving the pre-deposit of the demanded amount under Rule 6(3)(i) of Cenvat Credit Rules, 2004, interest, and penalty until the appeal's disposal. The decision was based on the appellant's prima facie case and the possibility of adjusting the demanded amount against the duty already paid, ensuring a revenue-neutral position for the appellant.