2018 (2) TMI 527 - AT - Central Excise

CENVAT credit - duty paid on inputs that were exclusively used for manufacture of exempted products - Held that - the inputs were such as could have been used for both dutiable and exempt goods. That the appellant had been discharging its obligation to pay an amount equal to 6% of the value of exempted goods under rule 6(3)(i) of CENVAT Credit Rules, 2004 fortifies this claim of the appellant - credit not required to be reversed - appeal allowed.

Summary

Issues:
- Appeal against order confirming original demand and dropping penalty under CENVAT Credit Rules
- Alleged availing of CENVAT credit for inputs used in manufacturing exempted products
- Lack of evidence regarding exclusive use of inputs for exempted goods
- Interpretation of Rule 6 of CENVAT Credit Rules, 2004
- Appellant's argument on inability to segregate inputs for dutiable and exempt goods
- Discharge of obligation under Rule 6(3)(i) of CENVAT Credit Rules, 2004

Analysis:
The case involved an appeal against an order confirming the original demand of duty while dropping the penalty imposed under rule 15(2) of CENVAT Credit Rules, 2004. The appellant, a manufacturer of boilers and parts, was alleged to have availed CENVAT credit on inputs exclusively used for manufacturing exempted products between April 2012 and July 2013. During the scrutiny, the appellant paid the entire credit amount along with interest. The confirmation of recovery of credit was based on the assumption that inputs were procured solely for exempted goods without specifying the nature of exemption or how it was determined that inputs were for exclusive use in exempted product manufacture.

The Tribunal noted that Rule 6 of CENVAT Credit Rules, 2004 prohibits availing credit on inputs exclusively used for exempted goods and provides options for compliance. The appellant argued that due to the impossibility of segregating inputs for dutiable and exempt products, they should be allowed credit on all inputs by paying 6% of the value of exempted goods, a claim not refuted by lower authorities. This led the Tribunal to presume that the inputs could have been used for both dutiable and exempt goods, supported by the appellant's compliance with Rule 6(3)(i) by paying the required amount.

Considering the appellant's submission and lack of evidence supporting exclusive use of inputs for exempted goods, the Tribunal set aside the impugned order and allowed the appeal. The judgment highlighted the importance of distinguishing between inputs for dutiable and exempt goods, emphasizing the appellant's discharge of obligations under the relevant rules as a basis for their claim of entitlement to the credit availed.