2005 (6) TMI 14 - AT - Central Excise

Cenvat Credit - (i) payment of 8% under rule 6 (ii) where appellant recovered the amount as excise duty payable

Summary

Issues:
1. Interpretation of Rule 6 of the Cenvat Credit Rules, 2002 regarding payment of 8% of sale price for exempted goods.
2. Whether the recovery of 8% of sale price from the buyer constitutes excise duty.
3. Application of Rule 12 of the Cenvat Credit Rules, 2002 for recovery of the amount collected from the buyer.
4. Invocation of Section 11D of the Central Excise Act for recovering the amount.

Analysis:
1. The case involved the interpretation of Rule 6 of the Cenvat Credit Rules, 2002, which required the payment of 8% of the sale price of exempted goods. The appellant, a manufacturer of chemicals, had cleared both dutiable and exempt goods during the disputed period. The issue arose when the appellant recovered the 8% amount from the buyer, which the Department treated as a recovery of Modvat credit. However, the Tribunal found that the payment made by the appellant to the Government fulfilled the requirement of Rule 6, and the recovery from the buyer should not be equated to Modvat credit. The Tribunal held that the Department's invocation of Rule 12 for recovery was misconceived due to the lack of separate Modvat accounts by the appellant.

2. The Tribunal addressed the argument regarding whether the recovery of 8% of the sale price from the buyer constituted excise duty. The appellant contended that the buyer did not consider this amount as duty since they had issued duty exemption certificates. The Tribunal noted that the invoices issued by the appellant to the buyer explicitly showed the amount as "Excise Duty Payable." While the appellant claimed it was not excise duty, the Tribunal held that by representing the amount as duty in the invoices, the appellant's conduct indicated otherwise. The Tribunal suggested that the Department could invoke Section 11D of the Central Excise Act for recovery based on this representation.

3. Regarding the application of Rule 12 of the Cenvat Credit Rules, 2002 for the recovery of the amount collected from the buyer, the Tribunal found that the demand under Rule 12 was not sustainable. The recovery from the buyer was not in the nature of Cenvat credit, and equating it to Modvat credit was incorrect. Therefore, the Tribunal concluded that the demand under Rule 12 could not be upheld, and the Department could consider invoking Section 11D for recovery if deemed necessary.

4. In the final decision, the Tribunal vacated the demand under Rule 12 and allowed the appeal. The Tribunal advised the Department to proceed with recovery under Section 11D if they chose to do so. The judgment clarified the misinterpretation of rules and the nature of the amount collected, providing a comprehensive analysis of the issues raised in the case.