2018 (11) TMI 300 - AT - Central Excise

Intermediate goods - Clinker manufactured and used in the manufacture of Cement - benefit of N/N. 67/95-CE dated 16.03.1995 - International Competitive Bidding - The case of the department is that since the final product i.e. Cement is cleared under Exemption N/N. 6/2006-CE dated 01.03.2006, the Clinker manufactured and used for manufacturing of Cement is not eligible for Exemption N/N. 67/95-CE dated 16.03.1995. Held that - The appellant have manufactured Clinker which is an intermediate product and the same was consumed in the manufacturing of other final product i.e. Cement. The said final product i.e. Cement has been cleared against International Competitive Bidding in terms of Exemption N/N. 6/2006-CE dated 01.03.2006, according to which the rate of duty is nil. From the plain reading of the above notification, it is observed that as per the above Notification, exemption is available in respect of goods used captively in the factory, within the factory of production in relation to manufacturing of final product. The Proviso to above notification provides that nothing contain in this Notification shall apply to inputs used in or relation to the manufacture of final product which are exempted from the whole duty of excise or chargeable to nil rate of duty, however the exception to this Proviso is provided in respect of supplies meant as mentioned in Clause I to V and also under Clause (VI) when the obligation prescribed in Rule 6 of Cenvat Credit Rule, 2001 is discharged. The Exemption is available in respect of inputs used captively even though the final product is cleared under exemption as per Rule 6(6)(vii) of Cenvat Credit Rules, 2004 since the appellant s supply of final product is under N/N. 6/2006-CE. The issue is decided in the case of M/S. KEI INDUSTRIES LTD., N HASHMI VERSUS COMMISSIONER OF CENTRAL EXCISE 2016 (12) TMI 532 - CESTAT NEW DELHI , where it was held that As facts of the case are not disputed that the appellant is manufacturing final products and clearing the same on payment of duty in the open market and to Mega Power Projects without payment of duty. In that circumstances, the appellant is entitled for benefit of N/N. 67/1995 ibid for intermediate product emerging during the course of manufacture of final product. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Eligibility for Exemption Notification No. 67/95-CE for intermediate product Clinker used in the manufacture of Cement.
2. Applicability of Exemption Notification No. 6/2006-CE for final product Cement supplied against "International Competitive Bidding."
3. Compliance with Rule 6 of Cenvat Credit Rules, 2004.

Issue-Wise Detailed Analysis:

1. Eligibility for Exemption Notification No. 67/95-CE for Intermediate Product Clinker:

The primary issue is whether Clinker, an intermediate product used in the manufacture of Cement, is eligible for Exemption Notification No. 67/95-CE dated 16.03.1995. The appellant argues that despite the final product Cement being cleared under Exemption Notification No. 6/2006-CE, Clinker should still be eligible for exemption under Notification No. 67/95-CE. According to the appellant, Clause VI of the proviso to Notification No. 67/95-CE applies, as they have fulfilled the obligations under Rule 6 of the Cenvat Credit Rules, 2004. The Tribunal found that the appellant manufactured Clinker, which was used to produce Cement cleared under Exemption Notification No. 6/2006-CE, and thus, Clinker is eligible for exemption under Notification No. 67/95-CE.

2. Applicability of Exemption Notification No. 6/2006-CE for Final Product Cement:

The Cement was cleared against "International Competitive Bidding" under Exemption Notification No. 6/2006-CE, which prescribes a nil rate of duty. The Tribunal noted that the final product, Cement, satisfied the condition of being exempt from basic customs duty and additional duty of customs when imported into India. This condition aligns with the provisions of Rule 6(6)(vii) of the Cenvat Credit Rules, 2004, which exempts goods supplied against international competitive bidding from the duties of customs.

3. Compliance with Rule 6 of Cenvat Credit Rules, 2004:

The appellant complied with Rule 6 of the Cenvat Credit Rules, 2004, which exempts them from maintaining separate accounts for inputs used in manufacturing dutiable and exempted final products. The Tribunal referenced the case of Thermo Cables Ltd, where it was held that manufacturers clearing final products against international competitive bidding under Notification No. 6/2006-CE are not liable to maintain separate accounts or pay an amount equal to 10% of the value of exempted goods. The Tribunal concluded that since the appellant’s final product, Cement, was cleared under Notification No. 6/2006-CE, the exemption under Notification No. 67/95-CE is applicable to Clinker.

Conclusion:

The Tribunal concluded that the appellant is entitled to the benefit of Exemption Notification No. 67/95-CE for Clinker used in the manufacture of Cement, which was cleared under Exemption Notification No. 6/2006-CE. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief, if any.

(Pronounced in the open court on 02.11.2018)