2023 (3) TMI 1471 - AT - Central Excise

CENVAT Credit - inputs gone in the manufacture of the final product viz. LPG cleared at NIL rate of duty under Notfn. No.4/2006-CE dated 1.3.2006, as amended - HELD THAT - The issue involved in the present two appeals is no longer res integra and covered by the decision of the Tribunal in appellant s own case RELIANCE INDUSTRIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI 2022 (11) TMI 923 - CESTAT MUMBAI where it was held that the principle stands established that rule 6 of CENVAT Credit Rules, 2004 is inoperable ab initio in such clearances and the credit was allowed. There are no merits in the impugned order and the same is set aside - appeal allowed.

Summary

Issues Involved:
1. Eligibility for CENVAT credit on inputs used in the manufacture of exempted goods.
2. Applicability of Rule 6 of CENVAT Credit Rules, 2004.
3. Reversal of CENVAT credit and refund claims.

Summary:

1. Eligibility for CENVAT Credit on Inputs Used in the Manufacture of Exempted Goods:
The appellants were not eligible for the CENVAT credit on the inputs used in the manufacture of LPG cleared at NIL rate of duty under Notfn. No.4/2006-CE dated 1.3.2006. The duty reversed/paid by them on such inputs was correct, and the refund claims rejected by the respondent were upheld.

2. Applicability of Rule 6 of CENVAT Credit Rules, 2004:
The issue of whether the goods cleared were 'exempted goods' within the meaning of rule 2(d) of CENVAT Credit Rules, 2004 was settled in favor of the appellant by the Hon'ble Gujarat High Court in the appellant's own case. The Tribunal followed this precedent, holding that the entire quantity of input and input services was used for the manufacture of dutiable goods, and the emergence of LPG as a by-product did not necessitate the application of Rule 6.

3. Reversal of CENVAT Credit and Refund Claims:
The Tribunal referred to the Hon'ble Gujarat High Court's judgment in the case of Sterling Gelatin and the Hon'ble Supreme Court's decision in National Organic Chemical Industries Limited. Both judgments supported the view that by-products emerging unavoidably during the manufacture of dutiable goods do not require separate accounting or reversal of CENVAT credit. The Tribunal concluded that Rule 6 of CENVAT Credit Rules, 2004 is inoperable ab initio in such clearances, thereby setting aside the impugned order and allowing the appeals.

Conclusion:
The appeals were allowed, and the impugned orders were set aside, with the principle established that Rule 6 of CENVAT Credit Rules, 2004 does not apply to clearances where the entire quantity of input and input services is used for the manufacture of dutiable goods, even if exempted goods emerge as by-products.