2017 (5) TMI 605 - AT - Central Excise

CENVAT credit - Cough syrup - whether manufacture of cough syrup was governed by Medicinal & Toilet Preparation Law, 1956 disentitling the respondent to avail CENVAT Credit of the duty paid on the fuel used to produce steam meant for ultimate use in manufacture of final products? - Held that - the goods is question is covered under the Medicinal & Toilet Preparation Act, 1955 and not subject to levy of duty under Central Excise Act, 1944. Accordingly such goods not being excisable goods, it cannot be presumed to be exempted goods, consequently it is out of the purview of the Central Excise Act, 1944 - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether the appellant is entitled to avail CENVAT Credit of the duty paid on fuel used in manufacturing cough syrup governed by the Medicinal & Toilet Preparation Law, 1956.

Analysis:
The issue in this case revolves around the entitlement of the appellant to avail CENVAT Credit on the duty paid on fuel used in the manufacturing process of cough syrup, which is governed by the Medicinal & Toilet Preparation Law, 1956. The Revenue contended that the cough syrup manufactured by the appellant falls under the Medicinal & Toilet Preparation Act, 1955, making it ineligible for CENVAT Credit on the duty paid on the fuel used for steam production. Both parties agreed that the goods in question are not subject to levy of duty under the Central Excise Act, 1944, as they are covered under the Medicinal & Toilet Preparation Act, 1955. The Tribunal observed that since the goods are not excisable, they cannot be presumed to be exempted goods under the Central Excise Act, 1944, thus falling outside its purview.

The Revenue relied on the judgment of the Apex Court in the case of Gujarat Narmada Fertilizers Co. Ltd. to support its argument that the appellant manufactured exempted goods using fuel for steam generation, which was ultimately used in the manufacturing process. However, the Tribunal distinguished the Revenue's case by emphasizing that the Apex Court's judgment highlighted that while the finished product was dutiable, it was exempt. The Tribunal analyzed the CENVAT scheme's sub-rules, emphasizing that CENVAT credit for duty paid on inputs used in the manufacture of exempted final products is not allowable. It clarified the application of sub-rules (1) and (2) concerning fuel inputs and non-fuel inputs, stating that the legal effect of sub-rule (1) applies to all inputs, including fuel inputs, except for non-fuel inputs. Consequently, the Tribunal concluded that the Revenue failed in its appeals, leading to their dismissal.

In conclusion, the judgment highlights the intricacies of availing CENVAT Credit on duty paid for inputs used in the manufacturing process of goods governed by specific laws. It underscores the importance of understanding the nuances of the CENVAT scheme and the applicability of its sub-rules in determining the eligibility for such credits, ultimately leading to the dismissal of the Revenue's appeals.