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2016 (12) TMI 1045 - AT - Central ExciseEligibility to notification 14/2002-CE dated 1st March 2002 - denial on the ground that condition of non-availment of CENVAT credit on inputs and capital goods had not been complied with - Held that - Reliance has been placed on the decision of the Tribunal in Indore Steel & Iron Mills Ltd v. Commissioner of Central Excise Indore 2002 (2) TMI 255 - CEGAT, NEW DELHI which has held that credit taken on fuel does not have to be reversed - the appellant has complied with the conditions of non-availment of CENVAT credit and is, therefore, eligible for the exemption - appeal allowed - decided in favor of appellant.
Issues:
- Eligibility for exemption under notification 14/2002-CE dated 1st March 2002. - Compliance with the condition of non-availment of CENVAT credit on inputs and capital goods. - Reversal of credits on inputs and capital goods. - Interpretation of rule 6(3) of CENVAT Credit Rules, 2002. - Treatment of fuel and lubricants in the manufacturing process. Eligibility for Exemption under Notification 14/2002-CE: The case revolved around M/s Hindoostan Spinning & Weaving Mills appealing against the denial of eligibility for exemption under notification 14/2002-CE dated 1st March 2002 by the Commissioner of Central Excise (Appeals), Pune-II. The denial was based on the alleged non-compliance with the condition of non-availment of CENVAT credit on inputs and capital goods. The appellant had availed of the exemption but paid duty on clearances to its processing house, leading to a demand confirmation by the lower authority. Compliance with Non-Availment of CENVAT Credit: The appellant contended that they followed rule 6(3) of CENVAT Credit Rules, 2002, ensuring that CENVAT credit was only taken to the extent that inputs were used for dutiable goods. They argued that the duty attributable to yarn used in exempt goods was not retained in the CENVAT credit account, and credit taken on inputs was regularly reversed. The impugned order acknowledged the regular reversals but held that lumpsum reversals at the end of the month were not acceptable, citing a Supreme Court decision. The appellant maintained that their manufacturing process complied with the exemption notification's conditions. Interpretation of Rule 6(3) of CENVAT Credit Rules: The Tribunal found that the impugned order had overly scrutinized the compliance with the non-availment condition based on the timing of credit reversals. Following the principle laid down by the Supreme Court in Chandrapur Magnet Wires (P) Ltd, the Tribunal concluded that as long as the credit was not retained for future use, the condition of non-availment was met. Therefore, the finding against the appellant regarding lumpsum reversals was deemed unsustainable. Treatment of Fuel and Lubricants in Manufacturing Process: Regarding fuel and lubricants, the Tribunal recognized them as consumables necessary for manufacturing processes, exempting them from proportionate reversals under rule 6 of CENVAT Credit Rules. Citing a previous Tribunal decision, the Tribunal held that credit taken on fuel did not need to be reversed. Consequently, the appellant was found to have complied with the non-availment conditions and was deemed eligible for the exemption, leading to the allowance of the appeal. This comprehensive analysis of the judgment highlights the key issues addressed and the Tribunal's detailed reasoning in resolving each matter.
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