2008 (3) TMI 158 - AT - Central Excise

Appellant, EOU contend that the service tax paid on transportation charges is not utilized by them as their final product is chargeable to nil rate of duty, so they are entitled to refund of the amount paid as service tax - Revenue contend that appellant is engaged in the manufacture of exempted goods, it was not entitled to credit, is not acceptable because despite impugned good (slate stone tiles) are exempted u/not. 23/03, they are excisable to 30 % of prevailing custom duty- refund allowed

Summary

Issues:
1. Interpretation of rule 6(1) of the Cenvat Credit Rules regarding the allowance of cenvat credit on inputs used in the manufacture of exempted goods.
2. Determination of whether goods manufactured by the appellant qualify as exempted goods under the Cenvat Credit Rules.
3. Application of Notification No. 23/03-CE dated 31.03.2003 in the context of the duty liability for the goods manufactured by the appellant.
4. Clarification on the definition of exempted goods under the Cenvat Credit Rules and its impact on the eligibility for cenvat credit.

Analysis:
1. The main issue in this case revolves around the interpretation of rule 6(1) of the Cenvat Credit Rules, which restricts the allowance of cenvat credit on inputs or input services used in the manufacture of exempted goods. The Revenue argued that since the appellant was engaged in manufacturing exempted goods, cenvat credit was not allowable as per the rules. However, the appellant contended that their goods, although chargeable to nil rate of duty, did not fall under the category of "exempted goods" as defined in the Cenvat Credit Rules.

2. The Tribunal examined the applicability of Notification No. 23/03-CE dated 31.03.2003, which exempted excisable goods from a portion of the duty of excise leviable under the Central Excise Act. The appellant argued that their liability to pay duty at 4.50% of the prevailing customs duty rate indicated that their goods were not truly exempted. This argument was accepted by the Tribunal, which concluded that the appellant's goods did not qualify as exempted goods under the Cenvat Credit Rules.

3. The judgment delved into the definition of exempted goods under the Cenvat Credit Rules, emphasizing that goods chargeable to nil rate of duty are also considered exempted goods for the purpose of cenvat credit eligibility. Despite the goods being chargeable to nil rate of duty, they would be deemed exempted goods unless specified otherwise in a notification under the Central Excise Act. This clarification was crucial in determining the appellant's eligibility for cenvat credit.

4. In light of the legal analysis and interpretation of relevant provisions, the Tribunal ruled in favor of the appellant, allowing them to claim a refund of cenvat credit on the inputs used in the manufacturing process. The judgment highlighted the distinction between exempted goods and goods chargeable to nil rate of duty, ultimately affirming the appellant's entitlement to the refund. The case was remanded to the Assistant Commissioner for further verification and necessary action based on the Tribunal's decision.