2011 (10) TMI 533 - AT - Central Excise

Waiver of pre deposit - Denial of CENVAT Credit - Held that - Prima facie, this was not the dispute which arose between the assessee and the Revenue in the instant case. It is not in dispute that, during the period of dispute, the assessee cleared a part of their production on payment of duty for export and subsequently claimed drawback. Another part of their production was cleared to the DTA by availing full exemption from payment of duty in terms of Notification No. 29/2004-C.E., dated 9-7-2004 as amended by Notification No. 58/2008-C.E., dated 7-12-2008. It is, again, not in dispute that the same capital goods were used for the manufacture of the goods exported and those cleared to the DTA. No provision of Cenvat Credit Rules, 2004 required the assessee to maintain separate accounts of any sort for the purpose of claiming Cenvat credit on the capital goods. On the other hand, Rule 6(4) only forbade availment of Cenvat credit on the capital goods exclusively used for the manufacture of exempted goods. This rule, in any case, did not arise before the Board for clarification - Prima facie, capital goods used for manufacture of both dutiable and exempted products are not covered by Rule 6(4) of the Cenvat Credit Rules, 2004 and hence Cenvat credit can be claimed thereon - Stay granted.

Summary

Issues:
- Waiver of pre-deposit and stay of recovery sought by the appellant in relation to duty and penalty imposed due to denial of Cenvat credit on certain capital goods.

Analysis:

1. Issue of Denial of Cenvat Credit:
The appellant sought waiver of pre-deposit and stay of recovery concerning duty and penalty imposed due to the denial of Cenvat credit on specific capital goods used for manufacturing both dutiable and exempted products without maintaining separate accounts. The impugned demand of duty was a result of the denial of Cenvat credit based on the argument that the capital goods were used for both types of goods without maintaining separate accounts as per a specific Board circular. However, the Tribunal found a prima facie case for the appellant as per Rule 6(4) of the Cenvat Credit Rules, 2004, which stipulates that Cenvat credit can only be denied on capital goods exclusively used for the manufacture of exempted goods. The Board's clarification on availing full exemption and payment of duty simultaneously did not directly apply to the dispute at hand, where the appellant cleared goods for export and to the DTA using the same capital goods without the need for separate accounts as required by the rules.

2. Interpretation of Rule 6(4) of Cenvat Credit Rules, 2004:
The Tribunal analyzed Rule 6(4) of the Cenvat Credit Rules, 2004, and concluded that capital goods used for the manufacture of both dutiable and exempted products are not covered by this rule. Therefore, the Tribunal held that Cenvat credit can be claimed on such capital goods. As a result, the Tribunal granted the waiver of pre-deposit and stay of recovery as requested by the appellant, considering the specific circumstances and application of the relevant legal provisions.

In conclusion, the judgment by the Appellate Tribunal CESTAT Bangalore addressed the issues of denial of Cenvat credit on certain capital goods used for manufacturing both dutiable and exempted products. The Tribunal found in favor of the appellant, ruling that Rule 6(4) of the Cenvat Credit Rules, 2004 did not apply to capital goods used for both types of products, allowing the appellant to claim Cenvat credit. The decision highlighted the importance of interpreting the rules in the context of the specific case at hand and ensuring compliance with the relevant legal provisions.