2017 (10) TMI 1111 - AT - Central Excise

CENVAT credit - inputs - silver nitrate, tungsten powder, hydrazine hydrate etc. which are used in the manufacture of final products - Department was of the view that since the appellant was clearing duty paid as well as exempted products, they are required to reverse the amount at the rate of 5% of the value of clearance of exempted products, in terms of Rule 6(3) of CCR, 2004 - Held that - Revenue has not brought any evidence on record to establish that duty paid inputs have, infact, been utilized in the manufacture and clearance of exempted products which is the primary requirement to incur the mischief of Rule 6(3) - it is incumbent upon the Revenue to bring on record evidence to indicate that inputs on which cenvat credit has been availed, have been used partially in the manufacture of dutiable goods as well as partially in exempted products. In the absence of such an evidence, it is not proper to raise demand of duty on the basis of doubts. It is evident that significant quantity of silver on which credit was not taken has also been used in the manufacture of dutiable goods - In the light of fact that appellant has maintained the records, regarding receipt of duty paid inputs and use of the same in the manufacture and clearance of dutiable products, demand is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues: Cenvat credit availed on inputs for manufacturing dutiable and exempted products, requirement of reversal under Rule 6(3) of Cenvat Credit Rules, 2004.

Analysis:
The appeal challenged Orders-in-Original regarding cenvat credit availed on inputs used in manufacturing final products. The dispute arose from the appellant's production of dutiable and exempted goods, leading to a demand for reversal under Rule 6(3) of Cenvat Credit Rules, 2004. The appellant, engaged in manufacturing electrical contacts and other products, contended that the inputs were solely used for dutiable goods, maintaining detailed records of procurement and utilization. The department argued that certain processes were common for both duty paid and non-duty paid inputs, necessitating the reversal of credit.

During the hearing, the appellant emphasized the exclusive use of duty paid inputs for dutiable products, while the department supported the duty reversal requirement. The Tribunal examined the procurement of silver by the appellant, both duty paid and non-duty paid, for manufacturing dutiable and exempted products. The appellant claimed that records proved the duty paid inputs were solely utilized for dutiable goods, with exempted products manufactured only from non-duty paid silver bars. The Tribunal highlighted the necessity for Revenue to prove dual usage of inputs for dutiable and exempted products to enforce the reversal under Rule 6(3).

The Tribunal scrutinized the appellant's records and observed doubts raised by the adjudicating authority regarding the refining process of silver and the absence of specific registers for exempted goods. However, without concrete evidence demonstrating dual usage of inputs, the demand for reversal lacked substantiation. Noting the significant use of non-duty paid silver in dutiable goods, the Tribunal emphasized the importance of evidence before enforcing duty demands. Ultimately, considering the maintained records and lack of conclusive proof of dual usage, the Tribunal set aside the demand, ruling in favor of the appellant.