2015 (2) TMI 38 - AT - Central Excise

Waiver of pre deposit - CENVAT Credit - Bar of limitation - benefit of Notification No. 06/2006- CE dated 01/03/2006 - Non maintenance of separate accounts - Held that - Cenvat Credit Rules, envisages availment of Cenvat credit only when the inputs, inputs services, capital goods are used in or in relation to manufacture of dutiable final products, except in certain situations where the goods are cleared for exports or supplied to UN and other agencies or the clearances are effected under 7 specified notification under the 3 rd proviso to Rule 3 (4) of Cenvat Credit Rules. In all other cases, the conditions for availment of credit has to be scrupulously satisfied. Where the goods are exempted from payment of duty, Cenvat Credit Rules, 2004 does not provide for availment of credit. As per sub-rule (1) of Rule 6, Cenvat Credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of exempted services , This position has been clarified by the Hon'ble Apex Court in the decision relied upon by the Revenue in the case of Amrit Paper (cited supra). Further even in respect of goods on which payment of duty is remitted, Cenvat credit has to be reversed as per Rule 3 (5C) of Cenvat Credit Rules. Prima facie appellant has not made out any case on merits for a complete waiver of pre-deposit adjudged against the appellant. However, there appears to be some merit in the appellant's contention that part of the demand is time barred inasmuch as in respect of the other unit of the appellant where identical goods were manufactured, the appellant has been disputing the demand for reversal of credit and the appellate authority had confirmed the duty demand only for the normal period of limitation and the demand for the extended period was dropped on account of time bar. In the present case, the demands for the normal period of limitation as informed to us by the appellants is approximately ₹ 19 lakhs. Therefore, we direct the appellant to make a pre-deposit of ₹ 19 lakhs within a period of four weeks - Partial stay granted.

Summary

Issues:
- Availment of Cenvat credit on inputs for manufacturing exempted goods
- Applicability of Rule 6 of Cenvat Credit Rules, 2004
- Time-barred demands and waiver of pre-deposit

Analysis:

Availment of Cenvat credit on inputs for manufacturing exempted goods:
The appellant, a manufacturer of finned Tube - Heat Exchangers, availed Cenvat Credit on inputs, capital goods, and input services while also benefiting from Notification No. 06/2006-CE. The dispute arose as the appellant did not maintain separate accounts for inputs used in manufacturing dutiable and exempted goods. The Revenue contended that Rule 6 of the Cenvat Credit Rules, 2004 would apply, making the appellant liable to pay a sum for exempted goods. The appellant argued that goods were cleared under bond, not exemption, citing relevant case laws. The Tribunal acknowledged the necessity of scrupulously satisfying conditions for credit availment and ruled that reversal of credit is mandated even if duty is remitted. The appellant was directed to make a pre-deposit of the amount for the normal period of limitation, acknowledging some demands as time-barred.

Applicability of Rule 6 of Cenvat Credit Rules, 2004:
The Tribunal clarified that Cenvat Credit is not allowed for inputs used in manufacturing exempted goods. The decision in Amrit Paper case was cited to support the non-availability of credit on inputs for exempted final products. Despite the appellant's reliance on past judgments, the Tribunal emphasized the current legal requirement for credit reversal under Cenvat Credit Rules. The appellant's argument for a complete waiver of pre-deposit was not accepted, highlighting the need for compliance with the credit reversal provisions.

Time-barred demands and waiver of pre-deposit:
The Tribunal recognized the appellant's contention regarding time-barred demands based on similar cases where demands were dropped due to time limitations. A partial waiver of pre-deposit was granted, requiring the appellant to deposit a specified amount within a set timeframe. Failure to comply would result in dismissal of the appeal without further notice. The Tribunal's decision aimed to balance the appellant's concerns with the legal obligations under the Cenvat Credit Rules, providing a structured approach to address the issues raised in the appeal.