2017 (12) TMI 1247 - AT - Central Excise

CENVAT credit - Naptha - case of the department is that in terms of provisions of Rule 6(1) of CCR, Cenvat credit on duty paid on the Naphtha is not admissible to them as the same is used in the manufacture of exempted final products, viz. Fertilisers - Held that - Ld. Counsel has raised the issue of quantification dispute of the Cenvat credit on Naphtha on the basis that other than the Naphtha some other fuel such as natural gas, furnace oil were used. Accordingly, quantum of Naphtha against total generation of steam will stand reduced, however this being matter of fact, has to be verified - matter may be sent to the adjudicating authority for verification of the re-quantification done by the appellant. Penalty u/r 15 of CCR - Held that - It is admitted that appellant have availed wrong credit as provision of Rule 6(1) is very explicit and there is no confusion that the Cenvat credit in respect of input used in the exempted goods is not available - there is clear contravention of the Rule 6(1) - penalty upheld. Appeal allowed in part by way of remand.

Summary

Issues:
- Admissibility of Cenvat credit on duty paid Naphtha used in the manufacture of exempted final products
- Dispute regarding quantification of Cenvat credit attributed to Naphtha
- Imposition of penalties under Rule 15 of Cenvat Credit Rules

Analysis:

Admissibility of Cenvat Credit on Naphtha:
The appellant, engaged in manufacturing excisable goods, used duty paid Naphtha as an input for generating steam, which was further utilized in producing exempted fertilizers. The department contended that as per Rule 6(1) of Cenvat Credit Rules, Cenvat credit on Naphtha used in manufacturing exempted products is inadmissible. The appellant had used Naphtha for steam generation, part of which was utilized in manufacturing exempted fertilizers. The adjudicating authority confirmed the demand for recovery of Cenvat credit and imposed penalties.

Dispute on Quantification of Cenvat Credit:
The appellant did not dispute the demand for Cenvat credit but raised concerns about the quantification. The appellant argued that besides Naphtha, other inputs like natural gas and furnace oil were also used for steam generation, impacting the Cenvat credit attributed to Naphtha. They presented a quantification chart showing reduced Cenvat credit amounts. The issue involved interpretation of law, and the appellant emphasized that there was no malafide intention, requesting the penalty to be revoked.

Penalties Imposed under Rule 15 of Cenvat Credit Rules:
The Revenue reiterated the findings of the impugned order, emphasizing that the quantification dispute was raised after the appellant provided the figures themselves. The Tribunal acknowledged that the appellant was not entitled to Cenvat credit on Naphtha used for manufacturing exempted goods. While the appellant's re-quantification argument was considered, it was deemed a matter of fact requiring verification. The Tribunal remanded the matter to the adjudicating authority for re-quantification and a denovo adjudication order. Penalties were upheld under Rule 15, citing the explicit provision of Rule 6(1) and the clear contravention by the appellant in availing Cenvat credit on Naphtha.

In conclusion, the Tribunal disposed of the appeal by remanding the case for re-quantification of the demand and penalties after verifying the appellant's re-quantification submission. The penalties imposed under Rule 15 were maintained, emphasizing the contravention of Rule 6(1) regarding Cenvat credit on inputs used in exempted goods.