2016 (12) TMI 1736 - AT - Central Excise

MODVAT/CENVAT Credit - inputs used partially in the manufacture of duty paid goods as well as partly in exempted goods - demand of reversal of an amount of 8% of the value of limestone cleared to Unit-II - Held that - The entire MODVAT credit availed by the appellant on the duty paid explosives utilised for mining of limestone has been reversed alongwith interest - once the MODVAT credit availed has been reversed, it should be considered as not availed ab initio - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Reversal of cenvat credit under Rule 57CC for limestone transferred between units.
2. Interpretation of Rule 57CC in the context of utilization of limestone in manufacturing duty paid cement.
3. Applicability of the judgment in Chandrapur Magnet Wires (P) Ltd. vs. CCE, Nagpur 1996 (81) ELT 3 (SC) on the reversal of modvat credit.

Analysis:
1. The case involved a manufacturer of cement with two registered units, where limestone mined from captive mines was used in manufacturing cement. The department demanded a reversal of cenvat credit under Rule 57CC for the limestone transferred between the units, treating it as clearance of exempted products.

2. The appellant argued that the limestone transferred to Unit-II was also used in manufacturing duty paid cement, hence no justification existed for the reversal of modvat credit under Rule 57CC. They contended that the entire credit on duty paid explosives had been reversed, citing the Chandrapur Magnet Wires case, which stated that once modvat credit is reversed, it should be considered as not availed ab initio.

3. The authorities confirmed the duty payment of 8% of the value of limestone transferred under Rule 57CC. However, the Tribunal found that the modvat credit on duty paid explosives had been entirely reversed, in line with the Chandrapur Magnet Wires case. The Tribunal held that based on the Supreme Court's decision, the credit should be deemed as not availed at all. Consequently, the demand for reversal under Rule 57CC was deemed unjustified and set aside, leading to the allowance of the appeals and the reversal of the impugned orders.