2018 (7) TMI 980 - AT - Central Excise

N/N. 65/1997-CE in terms of clause 6 of Proviso to the Notification - Manufacture of intermediate goods - CENVAT Credit on any input not availed - Compliance with Rule 6(1) of the Cenvat Credit Rules, 2004 - Held that - The appellant though manufacturing intermediate goods, namely, plastic powder out of plastic granule, but they are also not availing the Cenvat Credit. The Exemption Notification in respect of intermediate input is provided under the N/N. 67/1995-CE. From notification, it is observed that the exemption is available under the said Notification if the assesse complied with the provision of Rule 6 of Cenvat Credit Rules, 2004. In terms of Rule 6(1), the appellant should not avail the Cenvat Credit in respect of inputs used in the manufacture of exempted final product - In the facts of the present case also the appellant have not availed the Cenvat Credit in respect of plastic granules, accordingly, they have scrupulously complied with the provisions of Rule 6(1), therefore, according to the provision under clause (vi) of Proviso to N/N. 67/1995-CE, the appellant became eligible for exemption N/N. 67/1995-CE in respect of their intermediate inputs i.e. plastic powder. Benefit of notification allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Exemption Notification 31/2004-CE for intermediate goods.
2. Compliance with Rule 6 of Cenvat Credit Rules, 2004 for exemption eligibility.

Analysis:
1. The appellant, engaged in manufacturing interlining of textile products under Exemption Notification 31/2004-CE, faced a dispute regarding the excisability of the intermediate goods, plastic powder, used in the manufacturing process. The department contended that converting plastic granules to powder constituted excisable goods, thus liable to duty since used in exempted final products. The appellant argued for exemption under Notification 67/1995-CE, citing compliance with Rule 6(1) of Cenvat Credit Rules, not claiming Cenvat Credit. The lower authorities disregarded this argument, leading to the appeal.

2. The appellant's counsel emphasized their non-availment of Cenvat Credit, meeting Rule 6(1) requirements, entitling them to exemption under Notification 67/1995-CE. The Revenue, represented by the Superintendent, reiterated the impugned order's findings. The Tribunal, after considering both sides' submissions, analyzed the relevant provisions of the exemption notification and the Cenvat Credit Rules. It noted that the exemption under Notification 67/1995-CE hinged on Rule 6 compliance, specifically not availing Cenvat Credit for inputs used in manufacturing exempted final products.

3. Referring to the Mumbai Tribunal's decision in Funskool (India) Ltd. case, the Tribunal highlighted the importance of Rule 6(1) in the context of exemption eligibility. It clarified that Rule 6(2) obligations were not applicable since the appellant did not avail Cenvat Credit at all. The Tribunal concluded that the appellant fulfilled Rule 6(1) by not claiming credit for inputs used in exempted goods, thus meeting the exemption criteria under Notification 67/1995-CE. Consequently, the impugned order was set aside, and the appeals were allowed based on the appellant's compliance with Rule 6(1) and entitlement to the exemption for intermediate goods.

4. In line with the detailed analysis of the exemption notifications, Cenvat Credit Rules, and the Mumbai Tribunal's precedent, the Tribunal's decision highlighted the significance of Rule 6(1) compliance for availing exemptions on intermediate goods used in the manufacturing process. By emphasizing the appellant's adherence to Rule 6(1) and non-availment of Cenvat Credit, the Tribunal established the legal entitlement to exemption under Notification 67/1995-CE for the intermediate product, plastic powder, leading to the setting aside of the impugned order and allowing the appeals.