2019 (6) TMI 1616 - AT - Central Excise

CENVAT Credit - manufacture of dutiable as well as exempt goods - scope of exempted goods - reversal of credit in terms of Rule 6 of the Credit Rules - HELD THAT - The term excisable goods has been defined in Section 2(d) of the Central Excise Act to mean the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act 1985 as being subject to a duty of excise and includes salt. We find that the subject goods manufactured by the Appellant are not excisable goods - It is noted that in the case of SAHNI STRIPS WIRES (P) LTD. VERSUS COMMISSIONER OF C. EX. ROHTAK 2012 (12) TMI 469 - CESTAT NEW DELHI wherein the dispute pertained to the period from December 2006 to May 2008 for recovery of 10% of the value of exempted goods as alleged by the Revenue. The credit is not liable to be reversed in view of the provisions as were applicable during the period in dispute. The reversal of credit if at all will be applicable for the period post amendment made vide Notification no. 6/2015- C.E.(NT) dated 1st March 2015 - As per the relevant chapter notes the goods could not be said to be covered in the schedule to the Central Excise Tariff Act which is the basic requirement to constitute excisable goods as per the definition contained in Section 2(d) of the Act. For something to enjoy exemption under the Cenvat Credit Rules it should first qualify as excisable goods under the said Rules or the Central Excise Act and Central Excise Tariff. Goods that are outside the purview of Central Excise cannot be construed as exempted goods for the purpose of this Act. Simply put something can be exempted only if it was otherwise dutiable under a particular law. Rule 6 of the Cenvat Credit Rules does not find application in the instant case and hence the Appellant cannot be saddled with the duty demand - matter is being disposed on merits limitation issue is not considered - appeal allowed.

Summary

Issues involved:
- Whether the Appellant is required to reverse the credit in terms of Rule 6 of the Credit Rules?

Detailed Analysis:
1. Background: The appeal was filed against the demand of central excise duty, penalty, and interest confirmed by the Adjudicating Authority for the period 2008-09 and 2009-10.

2. Facts of the Case: The Appellant is engaged in the manufacture of excisable and non-excisable goods. The department claimed that the Appellant must pay the amount per proviso to Rule 6(3)(i) of the CENVAT Credit Rules, 2004, as they manufacture both dutiable and exempted goods.

3. Appellant's Contentions: The Appellant argued that the subject goods are not "excisable goods" and hence not "exempted goods" under the CENVAT Credit Rules. They cited relevant provisions and case laws to support their position.

4. Appellant's Submission: The Appellant reversed a proportionate credit and paid interest, contending that the demand was harsh. They relied on precedents to argue against disproportionate credit demands.

5. Amendment and Precedents: The Appellant highlighted an amendment in the Credit Rules and cited cases where the amendment was considered prospective, not retrospective, to support their argument.

6. Appellant's Defense: The Appellant contested the demand based on marketability tests, the use of alcohol in manufacturing, and the ground of limitation.

7. Department's Argument: The Department reiterated the findings of the Adjudicating Authority, emphasizing the need to reverse credit for goods not attracting central excise duty.

8. Judicial Review: The Tribunal examined whether the Appellant was required to reverse credit under Rule 6 of the Credit Rules.

9. Definition of Exempted Goods: The Tribunal analyzed the definition of "exempted goods" and "excisable goods" under the relevant provisions.

10. Legal Precedent: The Tribunal referred to a previous case to establish that the credit need not be reversed when the goods are not excisable.

11. Decision: The Tribunal concluded that the credit was not liable to be reversed during the period in dispute and should be applicable post the relevant amendment.

12. Marketability Test: The Tribunal emphasized that mere marketability does not make goods excisable, stating that goods outside the Central Excise purview cannot be considered exempted goods.

13. Final Verdict: Rule 6 of the CENVAT Credit Rules was found inapplicable, and the Appellant was not liable for the duty demand. The issue of limitation was not addressed as the matter was decided on merits.

14. Outcome: The impugned order was set aside, and the appeal filed by the Appellant was allowed.

This detailed analysis provides a comprehensive overview of the legal judgment, including the arguments presented, legal precedents cited, and the Tribunal's decision on whether the Appellant was required to reverse the credit under Rule 6 of the Credit Rules.