2017 (3) TMI 500 - AT - Central Excise

CENVAT credit - manufacture of plain laminated particle board falling under Chapter 44.06 of Central Excise Tariff - denial of credit on the ground that the finished goods were cleared under Nil rate of duty in terms of Rule 6(1) of CCR, 2002, credit of duty paid on input which is used in the exempted goods is not admissible - interest - penalty - Held that - whatever stock of input as such lying in stock as on 4-2-2004, appellant is not entitle for the Cenvat credit. Accordingly credit is admissible for ₹ 14,91,737/- in respect of input contained in WIP and for ₹ 7,19,986 contained in finished goods - As per closing stock on 3-2-2004 the credit in respect of input of ₹ 5,33,499/- lying in stock as such is not admissible - since majority of amount of Cenvat credit is admissible, I do not find it proper to uphold the penalty of ₹ 1 lakh imposed by the Commissioner(Appeals), therefore penalty is set aside - on the inadmissible Cenvat credit in respect of input lying in stock, appellant is liable to pay the interest - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
Applicability of Central Excise duty on plain laminated particle board falling under Chapter 44.06 of Central Excise Tariff, admissibility of Cenvat credit on input used in exempted goods, validity of penalty imposed by the Commissioner(Appeals).

Analysis:
The appellant, engaged in manufacturing plain laminated particle board under Chapter 44.06 of Central Excise Tariff, started paying Central Excise duty following a fresh levy imposed in the Finance Bill, 2003. The goods attracted duty at 8% Adv. until 3-2-2004, after which they were exempted from duty as per Notification No. 12/2004 dated 4-2-2004. The appellant cleared finished goods at Nil rate of duty post-exemption. A show cause notice contended that credit of duty paid on inputs used in exempted goods was inadmissible under Rule 6(1) of Cenvat Credit Rules, 2002. The adjudicating authority upheld the demand, with the Commissioner(Appeals) affirming it with a reduced penalty. The appellant appealed against this decision.

Upon consideration, the tribunal referred to a previous judgment stating that if modvat credit was availed and utilized when the final product was dutiable, and later the final product was exempted, the credit need not be reversed. The tribunal found that credit for inputs used in the manufacture of finished goods and goods in process was valid and could not be denied. However, credit for inputs lying in stock as of the exemption date (4-2-2004) was deemed inadmissible. The tribunal agreed with the judgments cited by the Revenue regarding inputs in stock on the exemption date. Consequently, the tribunal allowed credit for specific amounts related to inputs in WIP and finished goods, while disallowing credit for inputs in stock as of 3-2-2004. The penalty imposed by the Commissioner(Appeals) was set aside due to the majority of the Cenvat credit being admissible. Nonetheless, the appellant was liable to pay interest on the inadmissible credit. The tribunal modified the impugned order accordingly, partially allowing the appeal.

In conclusion, the tribunal ruled that the appellant was entitled to Cenvat credit for specific input amounts, while disallowing credit for inputs in stock as of the exemption date. The penalty imposed was set aside, but the appellant was liable for interest on the inadmissible credit. The impugned order was modified, partially allowing the appeal.