2018 (3) TMI 5 - AT - Central Excise

CENVAT credit - common inputs used in the manufacture of their dutiable final products as well as exempted final products - non-maintenance of separate records - Rule 6(3)(b) of CCR 2002 - Held that - appellant assessee have cleared under chapter X procedure or on the basis of CT-2 certificates - following the decision in the case of CCE Vs. SRF Ltd 2003 (11) TMI 5 - CESTAT NEW DELHI , where it was held that the clearance under Chapter X or under bond is not the same thing as clearance of goods wholly exempt or goods chargeable to nil rate of duty. Therefore, the provisions of the Rule 57 C are not applicable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay duty under Rule 6(3)(b) of Cenvat Credit Rules, 2002 for fabricated items sold without payment of duty.
2. Availability of extended period of limitation to the Department.

Analysis:
1. The main issue in this appeal was whether the appellant is liable to pay duty under Rule 6(3)(b) of Cenvat Credit Rules, 2002 for selling fabricated items without payment of duty against CT-2 certificates. The Revenue argued that the appellant did not maintain separate accounts for welding electrodes used in manufacturing both dutiable and exempted final products. The Revenue contended that since the appellant failed to prove that Cenvat availed on welding electrodes was not used in the exempted final products, the provisions of Rule 6(3)(b) were applicable, making the appellant liable to pay 8% on the selling price of the exempted final products. The Revenue also alleged suppression of facts to invoke the extended period of limitation.

2. The appellant contested the show cause notice, which was adjudicated in favor of the Revenue, confirming the duty amount under Rule 6(3)(b) with interest and penalty. The appellant then appealed to the Commissioner (Appeals), who rejected the appeal. However, the Tribunal found that the issue was similar to a previous ruling in the case of CCE Vs. SRF Ltd, where it was held that clearance under chapter X or on the basis of CT-2 certificates did not make the goods wholly exempt or chargeable to nil rate of duty. The Tribunal allowed the appeal in favor of the appellant, citing the precedent set in the SRF Ltd case and noting that the goods were cleared under an exemption provided to the buyer under a specific notification as a manufacturer exporter.

In conclusion, the Tribunal allowed the appeal in favor of the appellant, providing consequential benefits based on the precedent set in the CCE Vs. SRF Ltd case. The Tribunal noted that the Revenue's appeal against the SRF Ltd case was dismissed by the Supreme Court, further supporting the decision in favor of the appellant.