2019 (2) TMI 1482 - AT - Central Excise

CENVAT Credit - exempt goods - case of Revenue is that since LDPE pipes according to appellant are classifiable under 8424 9000 and are unconditionally exempted, the appellant assesse s option of paying central excise duty on LDPE pipes cleared to dealers is in violation of provisions of Section (1A) of Section 5(A) of Central Excise Act and CENVAT credit availed on capital goods, inputs and input services which are exclusively used in the manufacture of exempted goods needs to be reversed - Held that - There is no dispute on the classification of the products of LDPE pipes attached with sprayer for projecting, dispersing or spraying liquids etc. under chapter 8424. The only dispute is regarding the LDPE pipes which were cleared for other than agricultural and horticultural purposes. According to appellant assessee, these LDPE pipes are cleared to their dealers for other than agricultural and horticultural purposes, would merit classification under chapter 3917 and is liable for Central Excise duty and no exemptions are available hence they have correctly availed the benefit of CENVAT credit of the duties paid on LDPE granules, input services and capital goods. The appellant assessee had been reversing 10% of the value of exempted goods cleared by them correctly so, by following the provisions of Rule 6 of CENVAT Credit Rules, 2004 - when LDPE pipes are not cleared for agricultural and horticultural purposes, appellant s claim that these products are liable to Central Excise Duty as being classifiable under chapter 39 seems to be correct proposition of the law and we accept the same. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of LDPE pipes for duty payment and CENVAT credit reversal.

Analysis:
The judgment involves appeals against orders related to the classification of LDPE pipes under Chapter headings 8424 and 3917 for duty payment and CENVAT credit reversal. The appellant, a manufacturer of PVC, HDPE, and LDPE pipes, claimed exemption under notification No. 3/2005-CE for LDPE pipes used in agriculture or horticulture. The Revenue argued that LDPE pipes are unconditionally exempted, and the appellant's duty payment option violates the Central Excise Act. The lower authorities confirmed demands for CENVAT credit reversal, interest, and penalties. The first appellate authority partly allowed the appeal, leading to the current appeals.

The appellant contended that LDPE pipes are classifiable under Chapter 39 and subject to Central Excise duty unless used for agricultural or horticultural purposes. They argued that when the end use is unknown, duty payment is made. The appellant claimed CENVAT credit on common inputs and reversed 10% of exempted goods' value under Rule 6(3) of CENVAT Credit Rules 2004.

The Revenue pointed to invoices indicating LDPE pipes' exemption for agricultural or horticultural use. They argued that LDPE granules are exclusively used for manufacturing LDPE pipes, invoking Rule 6(1) of CENVAT Credit Rules. The Revenue contested the appellant's claim of exemption and duty payment options for LDPE pipes.

The Tribunal found that LDPE pipes were cleared for agricultural or horticultural use under Chapter 8424 and for other purposes under Chapter 3917. The appellant correctly availed CENVAT credit on LDPE granules, input services, and capital goods for LDPE pipes not used for agricultural or horticultural purposes. The Tribunal noted that LDPE pipes cleared for non-agricultural purposes were correctly classified under Chapter 39, subject to Central Excise duty.

In conclusion, the Tribunal set aside the impugned order challenged by the appellant and rejected the Revenue's appeal. The appeals of the appellant were allowed, and the Revenue's appeal was dismissed.