2008 (7) TMI 287 - AT - Central Excise

Credit on inputs used in goods manufactured for principal manufacturer on job work basis allegation that they had wrongly availed credit on their own input used in the exempted product held that goods manufactured on job work basis can t be considered as exempted goods since the principal manufacturer has to pay the duty on the same moreover Rule 6(1) of CCR specifically provides that credit is not allowed except in circumstances mentioned in sub-rule (2) of R. 6 - demand for credit fails

Summary

Issues:
- Availing cenvat credit on inputs used in manufacturing exempted products
- Precedent value of a Tribunal's decision under appeal
- Requirement of maintaining separate accounts for dutiable and exempted goods
- Application of Rule 6 of Cenvat Credit Rules

Availing Cenvat Credit on Inputs for Exempted Products:
The respondent availed cenvat credit on inputs used in manufacturing an exempted product, H.Acid, in addition to raw materials supplied by various parties. The Central Excise officers found this to be in contravention of Cenvat Credit Rules, leading to a show cause notice demanding recovery of wrongly availed credit. However, the respondent argued that goods manufactured on job work basis, like H.Acid, cannot be considered exempted goods since the principal manufacturer undertakes to pay relevant duty on the final product. The Commissioner (Appeals) upheld this stand, supported by the Larger Bench decision in the case of M/s Sterlite Industries (I) Ltd. v. CCE Pune 2005 (183) E.L.T. 353.

Precedent Value of Tribunal's Decision Under Appeal:
The Revenue contended that the Tribunal's decision loses its precedent value once appealed against, citing cases to support this argument. However, the respondent argued that the decision retains its precedent value until determined by the last court. The Tribunal emphasized that a decision under appeal does not lose its value entirely, and if found applicable on merits, it can be relied upon.

Requirement of Maintaining Separate Accounts:
The Revenue proposed disallowing cenvat credit under Rule 6(1) of Cenvat Credit Rules due to the respondent's failure to maintain separate accounts for exempted and dutiable goods. As per Rule 6(2), separate accounts are necessary for availing credit on inputs intended for dutiable goods. Since separate accounts were not maintained, Rule 6(2) was triggered, and the demand for cenvat credit failed.

Application of Rule 6 of Cenvat Credit Rules:
The judgment emphasized the application of Rule 6, stating that cenvat credit is not allowed except in circumstances mentioned in Rule 6(2), which necessitates maintaining separate accounts. The Larger Bench decision was deemed correctly applied in this case, concluding that goods manufactured on job work basis are not exempted goods, as the principal manufacturer is liable to pay duty. Consequently, the appeal filed by the Revenue was rejected.

This detailed analysis of the judgment addresses the issues of availing cenvat credit on inputs for exempted products, the precedent value of a Tribunal's decision under appeal, the requirement of maintaining separate accounts, and the application of Rule 6 of Cenvat Credit Rules, providing a comprehensive overview of the legal implications and decisions made in the case.