2016 (4) TMI 493 - AT - Central Excise

Rule 6(3) of the Cenvat Credit Rules, 2004(CCR) - Whether the appellant is required to pay 10% amount when common inputs are used in the manufacture of finished goods which are exempted as well as dutiable - Manufacture of Garden Rakes, Forks, Box Hinges fully exempted as per Notification No.5/2006-CE dated 01.03.2006 unconditionally. Held that - as per Rule 6(1)ibid, no credit shall be admissible in relation to manufacture of exempted goods. It has not been denied by the appellant that the goods manufactured by them are not unconditionally exempted. Simply by paying duty on exempted goods does not make the goods dutiable. As per the provisions contained in Section 5A of Central Excise Act, 1944, when there is an unconditional exemption Notification then an assessee/manufacturer shall not pay duty of excise on such exempted goods. Further as per Rule 6(3) of the Cenvat Credit Rules, 2004 when any common inputs are used in the manufacture of dutiable and exempted goods then appellant is required to pay an amount equivalent to 10% on the value of exempted goods as demanded by the Department. So far as the provisions contained in Rule 6(6) of Cenvat Credit Rules, 2004 are concerned, the case of the appellant is that even exempted goods are excisable goods, therefore, amount under Rule 6(3) cannot be denied if the goods are cleared without payment of duty. However, it is observed that as per provisions of Rule 6(6)(v) of Cenvat Credit Rules, 2004, amount is not required to be paid under Rule 6(3) when goods are removed without payment of duty for export under bond in terms of provisions of Central Excise Rules, 2002. In the case of theappellant, the goods were not exported under bond, but were cleared on payment of duty, therefore, First Appellate Authority was fully justified in dismissing the Appeal filed by the appellant and this Bench does not find any justification in interfering with the same. - Decided against the appellant

Summary

Issues:
- Whether the Appellant is required to pay 10% amount under Rule 6(3) of the Cenvat Credit Rules, 2004 when using common inputs for manufacturing both exempted and dutiable goods.

Analysis:
1. The Appellant, a manufacturer of excisable goods, argued that goods once cleared on payment of duty cannot be considered exempted goods under Rule 6(1) of Cenvat Credit Rules, 2004. They contended that Cenvat Credit should not be denied for goods exported under claim of rebate. The Appellant relied on case laws such as Repro India Ltd. v. UOI and Commissioner of C.Ex., Ahmedabad-III v. Gujarat Ambuja Exports Ltd. to support their argument.

2. The Revenue, represented by the Supdt.(AR), argued that the case laws cited by the Appellant were not applicable to the present case. They emphasized that the payment of duty does not make the goods dutiable, and as per Section 5A of the Central Excise Act, an assessee must avail of an exemption notification. The Revenue defended the Order-in-Appeal dated 15.09.2011 passed by the First Appellate Authority.

3. The Tribunal examined the issue of whether the Appellant is liable to pay 10% amount under Rule 6(3) of the Cenvat Credit Rules, 2004. It was noted that the Appellant's goods were fully exempted under a specific notification. The Tribunal found that paying duty on exempted goods does not make them dutiable, as per Section 5A of the Central Excise Act. Rule 6(3) mandates payment of 10% amount when common inputs are used for manufacturing both exempted and dutiable goods.

4. The Tribunal observed that the Appellant's reliance on case laws related to goods exported under bond was misplaced, as the goods in question were not exported under bond but cleared on payment of duty. Therefore, the Tribunal upheld the dismissal of the Appeal by the First Appellate Authority, as the Appellant was not entitled to Cenvat Credit under Rule 6(3) for goods cleared without payment of duty for export under bond.

5. In conclusion, the Tribunal dismissed the Appeal filed by the Appellant, stating that the goods were not exported under bond but cleared on payment of duty, justifying the First Appellate Authority's decision. The Tribunal found no reason to interfere with the lower authority's ruling.

This comprehensive analysis delves into the arguments presented by both parties, the legal framework governing the issue, and the Tribunal's reasoning leading to the dismissal of the Appeal.