2008 (2) TMI 183 - AT - Central Excise

Captively consumed inputs (Pig Iron, Cement) used in exempted and dutiable goods (DI Pipes) - respondent had kept separate accounts of inputs used in dutiable final products and exempted final products - since the respondents discharge the liability u/r 6 of CCR, by paying 10% of the sale value of the exempted goods (DI Pipes), they would be entitled for the benefit of exemption notification 67/95 revenue appeal dismissed

Summary

Issues:
Interpretation of notification 67/95 and Rule 6 of Cenvat Credit Rules.

Analysis:
The appeal was filed by the Revenue against the Order-in-Original passed by the Commissioner of Customs & Central Excise. The issue revolved around the interpretation of notification 67/95 and Rule 6 of Cenvat Credit Rules. The respondents, manufacturers of Pig Iron, Cement, and Ductile Iron Pipes, availed exemption under notification 67/95 for Pig Iron and Cement used in the manufacture of DI Pipes. The Revenue contended that since DI Pipes were partly cleared on duty payment and partly on exemption, the benefit of notification 67/95 should not apply to Pig Iron and Cement. The Adjudicating Authority dropped the demand after analyzing the notification and relevant rules. The Revenue challenged this decision, arguing that Pig Iron and Cement should not be exempt if final products are cleared partially on exemption. The Tribunal considered the case, focusing on whether the respondents complied with Rule 6 of Cenvat Credit Rules and maintained separate accounts for inputs used in dutiable and exempted final products.

The Tribunal observed that the respondents manufactured Pig Iron, Cement, and DI Pipes, all dutiable products. The key issue was the availability of exemption under notification 67/95 for Pig Iron and Cement used in DI Pipes production. The final products, DI Pipes, were cleared partly with duty payment and partly on exemption. The Tribunal noted that the exemption under notification 67/95 applies to intermediary products used in the manufacture of dutiable final products. The Commissioner found that the respondents fell under the proviso to the notification, indicating that they followed the prescribed procedures, including Rule 6 of Cenvat Credit Rules. The Tribunal emphasized that the respondents had discharged their duty liability by paying a percentage of the sale value of exempted goods and maintaining separate accounts for inputs used in dutiable and exempted products.

Upon careful consideration, the Tribunal concluded that the Commissioner correctly applied the law to the case. While captive consumption notification does not apply when final products are exempted, the respondents, by following Rule 6 and maintaining separate accounts, effectively discharged their duty liability. The Tribunal noted that the respondents did not avail any credit on inputs used for exempted DI Pipes, ensuring compliance with Rule 6. As a result, the Tribunal found no fault in the Commissioner's decision and dismissed the Revenue's appeal, as the respondents were entitled to the benefit of notification 67/95 due to their adherence to Rule 6 requirements.