2008 (6) TMI 35 - AT - Central Excise

Credit denied on ground that as per Rule 6(1) CCR credit is not allowed on inputs which are used in the manufacture of exempted goods export - Clause (vi) of Rule 6 (5) of CCR, 2002 provides that the restrictions envisaged in sub-rules 1 to 4 of Rule 6 shall not apply to exempted goods cleared for export under bond - hence assessee is entitled to take credit of duty paid on inputs contained in the exempted final products exported under bond in terms of Rule 6

Summary

Issues:
- Appeal against Order-in-Appeal passed by the Commissioner (Appeals) regarding manufacturing and clearance of veterinary injections without duty payment under Notification No. 6/2002-C.E.
- Interpretation of Rule 6 of Cenvat Credit Rules, 2002 regarding CENVAT credit on inputs used in the manufacture of exempted goods.
- Application of Rule 19 of Central Excise Rules, 2002 on export of goods under bond.
- Dispute over the denial of CENVAT credit on inputs used in the manufacture of exempted final products exported under bond.

Analysis:
The appeal was filed against the Order-in-Appeal passed by the Commissioner (Appeals) concerning the manufacturing and clearance of veterinary injections without duty payment under Notification No. 6/2002-C.E. The original authority confirmed a demand, interest, and penalty due to the non-payment of duty. However, the Commissioner (Appeals) set aside the order, stating it was inconsistent with Rule 6 of Cenvat Credit Rules, 2002. The Revenue challenged this decision, arguing that the Commissioner misinterpreted the provisions. The dispute centered on the interpretation of Rule 6 regarding the denial of CENVAT credit on inputs used in manufacturing exempted goods.

Regarding the application of Rule 19 of Central Excise Rules, 2002 on export of goods under bond, the Revenue contended that the manufacturer wrongly availed the benefit of this rule as their finished goods were exempt from duty payment. However, the Tribunal held that Rule 19 does not prohibit the manufacturer from exporting goods under bond, even if they are exempted from duty payment. The Tribunal emphasized that Rule 19 allows for the export of excisable goods without duty payment, regardless of whether the goods are exempted or not.

The core issue revolved around the denial of CENVAT credit on inputs used in the manufacture of exempted final products exported under bond. Rule 6 of Cenvat Credit Rules, 2002 outlines the obligations of manufacturers of dutiable and exempted goods. Sub-rule 5 of Rule 6 specifically exempts goods cleared for export under bond from the restrictions on CENVAT credit mentioned in sub-rules 1 to 4. The Tribunal concluded that the statutory provisions permitted the assessee to claim credit on duty paid inputs in exempted final products exported under bond. Consequently, the appeal filed by the Revenue was dismissed as lacking merit, affirming the legality of the impugned order.