2012 (5) TMI 529 - AT - Central Excise

CENVAT Credit - Whether the appellant is eligible to avail Cenvat credit paid on inputs i.e. H.R. Coils received by them for manufacture of pipes to be supplied to Gujarat Water Infrastructure Ltd. by availing exemption under Notification No. 6/2002-C.E. as amended from time to time - Held that - H.R. Coils received by the appellant were exclusively used for manufacturing of MS pipes to be sent to Gujarat Water Infrastructure Ltd. by availing exemption Notification No. 6/2002-C.E. as amended. It is also undisputed that the appellant had maintained the separate records and also has availed the Cenvat credit of the duty paid on said inputs. We find that provisions of Rule 6(1) of the Cenvat Credit Rules, 2002 will be applicable in this case. Rule 6(1) that Cenvat credit shall not be allowed on the quantity of input which is used for the manufacture of exempted goods - have cleared that MS scrap arising out of utilisation of such H.R. Coils was on payment of duty. By any stretch of imagination, scrap cannot be considered as manufactured product at least in the case in hand before us. We also find that the General Manager of the assessee has clearly and categorically stated that the H.R. Coils which were received by them on account of Petron Civil Engineering Pvt. Ltd. were used only for the purpose of manufacturing of pipes which were cleared without payment of duty. This being the factual matrix, we find that the appellant cannot claim the benefit of Rule 6(3) by debiting the amount equivalent to 8% of the value of the exempted goods and availed Cenvat credit on the H.R. Coils received by them - Decided against assessee.

Issues:
1. Eligibility to avail Cenvat credit on inputs for manufacturing exempted goods.
2. Interpretation of Rule 6(1) of the Cenvat Credit Rules, 2002.
3. Application of Rule 6(3) for availing Cenvat credit.
4. Time limitation for availing Cenvat credit.
5. Imposition of penalty and applicable provisions.

Issue 1: Eligibility to avail Cenvat credit on inputs for manufacturing exempted goods:
The appeal questioned whether the appellant could avail Cenvat credit on inputs, specifically H.R. Coils used for manufacturing pipes exempted from duty under Notification No. 6/2002-C.E. The appellant argued that they were eligible for the credit as they had reversed 8% of the value of the exempted goods. However, the Tribunal found that Rule 6(1) of the Cenvat Credit Rules, 2002 prohibited Cenvat credit on inputs used for manufacturing exempted goods. The appellant's claim that they maintained separate accounts and reversed a portion of the value was dismissed as there was no evidence of H.R. Coils being used for dutiable products. The Tribunal concluded that the appellant was not entitled to avail Cenvat credit on the H.R. Coils used for exempted goods.

Issue 2: Interpretation of Rule 6(1) of the Cenvat Credit Rules, 2002:
The Tribunal analyzed Rule 6(1) which states that Cenvat credit shall not be allowed on inputs used for manufacturing exempted goods. The appellant's argument that they reversed a portion of the value and maintained separate records was rejected as there was no proof of H.R. Coils being utilized for dutiable products. The Tribunal emphasized that the appellant could not claim the benefit of Rule 6(3) by merely debiting the amount equivalent to 8% of the value of exempted goods. The judgment highlighted the importance of complying with Rule 6(1) regarding the eligibility for Cenvat credit on inputs.

Issue 3: Application of Rule 6(3) for availing Cenvat credit:
The appellant contended that Rule 6(3) could be invoked if inputs were used for manufacturing dutiable products. However, the Tribunal noted the lack of evidence to support this claim. The Tribunal emphasized that the burden of proof rested on the appellant to demonstrate the usage of H.R. Coils for dutiable products to avail the benefit of Rule 6(3). Since such evidence was absent, the Tribunal ruled against the appellant's argument and upheld the decision denying Cenvat credit on the inputs used for exempted goods.

Issue 4: Time limitation for availing Cenvat credit:
Regarding the time limitation for availing Cenvat credit, the Tribunal found that the appellant could not rely on limitation defenses as they had not declared to the department their intention to avail Cenvat credit on H.R. Coils exclusively used for manufacturing exempted goods. The Tribunal agreed with the first appellate authority's decision on the limitation issue, emphasizing the importance of timely and proper declaration to the concerned authorities.

Issue 5: Imposition of penalty and applicable provisions:
The Tribunal addressed the imposition of penalty, stating that if the appellant paid the confirmed differential duty along with interest within 30 days, they could opt to pay a penalty equivalent to 25% of the duty liability. The Tribunal referred to the law established by the Hon'ble Gujarat High Court in a relevant case. The judgment clarified the penalty provisions applicable in the case and provided the appellant with an option for penalty payment upon fulfilling the specified conditions.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Ahmedabad provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's findings and conclusions on each aspect of the case.

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