2014 (10) TMI 271 - AT - Central Excise

Cenvat Credit - Exempted goods - Revenue is of the opinion that the appellants should have paid 10% of the value of zinc dross under Rule 6(4) of Cenvat Credit Rules, 2004 because there was no excise duty paid on the zinc dross cleared by them - Held that - Inasmuch as the said Zinc dross, so imported by them was found to be of low quality and not fit for use, the same were removed/sold by them, as such, without payment of duty, in the month of March, 2008 itself. Inasmuch as no CVD was paid on the said imported material, they never availed any credit and as such, were not required to reverse any credit at the time of clearance of the same - neither adjudicating authority nor Commissioner (Appeals) adverted to the above factual position, though the same were specifically placed before them. I have seen the Bill of Entry under which Zinc dross was imported by the appellant. The same Zinc dross stand cleared by them in the same very month as the appellant found the same to be of low quality. If that be so the invocation of the provisions of Rule 6, etc., for confirmation of demand of duty against the appellant are not proper and justified - Decided in favour of assessee.

Summary

Issues:
1. Liability under Rule 6(4) of Cenvat Credit Rules, 2004 for non-payment of excise duty on imported zinc dross.

Analysis:
The case involved the appellants who imported zinc dross and manufactured zinc ingots, along with zinc sulphur from the residue. The revenue contended that the appellants should have paid 10% of the value of zinc dross under Rule 6(4) due to non-payment of excise duty on the cleared zinc dross. Proceedings were initiated against the appellants, resulting in a demand of duty, interest, and penalty. The original adjudicating authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the present appeal.

During the proceedings, the appellants argued that the cleared zinc dross was imported and of low quality, hence not fit for use. They highlighted the bill of entry for the imported zinc dross, emphasizing that no countervailing duty (CVD) was paid on it, and thus, they did not avail any credit or need to reverse any credit during clearance. However, both the adjudicating authority and the Commissioner (Appeals) failed to consider this crucial factual position presented by the appellants.

The appellate tribunal examined the bill of entry for the imported zinc dross and noted that the same dross was cleared in the same month due to its low quality. Given that no CVD was paid on the imported material, the tribunal concluded that the invocation of Rule 6 for demanding duty from the appellants was unwarranted and unjustified. Consequently, the tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellants. The judgment was pronounced in open court, providing a favorable outcome for the appellants.