9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (11) TMI 749 - AT - Central ExciseCENVAT Credit - Reversal of credit when finished goods became exempt - Methol Flakes and Menthol Crystals - Applicability of Rule 11 (3) - Held that - Sub-rule 3 would be applicable if the some cenvat credit availed inputs are being used for manufacture of a final product and that final product has become fully exempt from duty. In such a situation, the assessee would be liable to pay an amount equal to the cenvat credit involved in respect of the inputs lying in stock or in process, or contained in the final products lying in stock on the date of exemption, and after deducting this amount from the cenvat credit balance, if any, as on the date of exemption, if any cenvat credit balance still remains, it shall lapse and the same shall not be allowed to be utilized for payment of duty on any goods whether cleared for home consumption or for export. In our view, this sub-rule would not apply when out of common cenvat credit availed inputs, more than one final products are manufactured and while some final products have become exempt, others have remained dutiable. Since in terms of sub-rule (4) of Rule 3 of the Rules, the cenvat credit may be utilized for payment of any duty of excise on any final product, if out of the same cenvat credit availed inputs, more than one final product are manufactured and out of those final products, one final product has become fully exempt from duty, the cenvat credit can be utilized for payment of duty on the other final products, which are dutiable and as such, the manufacturer s right to utilize the cenvat credit for payment of duty on the final products which are still dutiable cannot be taken away just because out of several final products, one final product has become exempt from duty. We, therefore, hold that the Revenue s interpretation of Rule 11(3) is not correct. While the provisions of sub-rule (3)(ii) of Rule 11 of the Cenvat Credit Rules, 2004 are not applicable, the provisions of sub-rule (1) of Rule 6 of the Cenvat Credit Rules, 2004, would be applicable , if during the period of dispute, the appellant were clearing their finished products for home consumption. However, the provisions of either sub-rule (1) or of sub-rule (2) read with sub-rule (3) of Rule 6 would not be applicable, if the appellant were exporting their finished products out of India under bond or under Letter of Undertaking. However, the Appellant have not produced any evidence in support of their plea that during the period of dispute, the finished products were being exported under bond/LUT. The impugned order is, therefore, set aside and the matter is remanded to the original adjudicating authority for de novo adjudication after ascertaining as to whether during the period of dispute, the appellant were exporting their final products and keeping in view our observations in this order. - Decided in favour of assessee.
Issues Involved:
1. Applicability of Rule 11(3) of the Cenvat Credit Rules, 2004. 2. Applicability of Rule 6 of the Cenvat Credit Rules, 2004. 3. Requirement to reverse Cenvat credit for inputs used in the manufacture of exempted goods. 4. Imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act, 1944. Issue-wise Analysis: 1. Applicability of Rule 11(3) of the Cenvat Credit Rules, 2004: The appellant, engaged in manufacturing Menthol flakes, Menthol Crystals, and De-Mentholised Oil (DMO), faced a situation where Menthol flakes and Menthol Crystals became fully exempt from duty w.e.f. 1.3.2008. The department argued that under Rule 11(3)(ii) of the Cenvat Credit Rules, the appellant must reverse the Cenvat credit for inputs used in the manufacture of these now-exempt products. The appellant contended that Rule 11(3) applies only when a single final product becomes exempt and not when multiple products, some of which remain dutiable, are manufactured from the same inputs. The tribunal held that Rule 11(3) would not apply when multiple final products are manufactured from common inputs, and some products remain dutiable. 2. Applicability of Rule 6 of the Cenvat Credit Rules, 2004: The department also invoked Rule 6, arguing that no Cenvat credit is admissible for inputs used in the manufacture of exempted goods unless separate accounts are maintained or an amount is paid as per Rule 6(3). The appellant argued that Rule 6(1), (2), and (3) would not apply as their products, including exempted ones, were exported under bond. The tribunal referred to multiple High Court judgments, holding that if fully exempt goods are exported under bond, Rule 6(1), (2), and (3) would not apply, and Cenvat credit need not be reversed. 3. Requirement to Reverse Cenvat Credit for Inputs Used in the Manufacture of Exempted Goods: The tribunal noted that if the appellant exported their products under bond, they would not need to reverse the Cenvat credit. However, if the products were cleared for home consumption, Rule 6(1) would apply, and Cenvat credit would not be admissible for inputs used in exempted goods. The tribunal remanded the case to the original adjudicating authority to verify whether the products were exported under bond during the disputed period. 4. Imposition of Penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act, 1944: The Commissioner (Appeals) had set aside the penalty imposed by the Addl. Commissioner, but upheld the Cenvat credit demand. The department argued that the penalty should be reinstated as the appellant had suppressed relevant information. The tribunal, however, focused on the need to verify the export status of the products before deciding on the penalty. Conclusion: The tribunal concluded that Rule 11(3)(ii) does not apply when multiple final products are manufactured from common inputs, with some remaining dutiable. Rule 6(1), (2), and (3) do not apply if the exempted products are exported under bond. The case was remanded for verification of the export status of the products during the disputed period to determine the applicability of Cenvat credit reversal and penalty. The impugned order was set aside for de novo adjudication.
|
