2019 (4) TMI 743 - AT - Central Excise

CENVAT Credit - impugned waste, cleared by the Appellant, post the insertion of Explanation, in March 2015 - Rule 6 of CCR - Held that - Rule 6 of the Credit Rules restricts cenvat credit attributable to manufactured exempted goods, cleared from a factory premises. The definition of exempted goods and final products were amended by insertion of an Explanation vide Notification No. 6/2015-CE (NT) dated March 1, 2015. In terms of the Explanation, non-excisable goods were specifically included within the sweep of exempted goods and final products. Accordingly, their clearance was exigible to Rule 6. The CBEC (Now CBIC) has issued Circular No. 1027/15/2016-CX dated April 25, 2016 wherein it clarified that post insertion of Explanation on March 1, 2015, credit upon clearance of waste, such as aluminium dross etc. needs to be reversed. In case, the revenue had any objection with respect to manner of reversal of cenvat credit, it should have pointed out then and there. Its acceptance implies that revenue completely agreed with the manner of computing reversal. Thus revenue cannot turn around and dispute the manner of reversal without bringing any additional evidence or point of law, not considered earlier - these submissions were duly made before the Appellate Authority which it has failed to take into account. In the absence of sustenance of duty demand, the demand of interest and penalty is also not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand under Rule 6 of the Cenvat Credit Rules, 2004 for the period March 1, 2015 to March 31, 2016 regarding clearance of waste and scrap without payment of excise duty.

Analysis:
The Appellant, engaged in manufacturing motorcycles and scooters, availed cenvat credit on inputs, capital goods, and input services. The case involved the clearance of waste and scrap without excise duty payment, leading to a demand under Rule 6 of the Credit Rules. The Appellant contended that Rule 6 requires credit reversal only for inputs involved in manufacturing exempted goods, satisfying the conditions of manufacture and exempted goods. They argued that waste and scrap are not manufactured goods and had regularly reversed credit for common input services. The Revenue, however, supported the Commissioner's findings post the Explanation insertion in March 2015, emphasizing credit reversal on all common inputs and services.

The Tribunal analyzed Rule 6, which restricts cenvat credit attributable to manufactured exempted goods cleared from a factory premises. The Explanation inserted in March 2015 broadened the definition of exempted goods to include non-excisable goods, making their clearance subject to Rule 6. However, the Explanation did not consider non-manufactured goods as exempted goods, as highlighted by the Appellant. The Tribunal agreed that the impugned waste and scrap, even if excisable, were not parts of manufactured goods, thus not falling under exempted goods.

Referring to a previous judgment, the Tribunal reiterated that even after the Explanation amendment, goods like waste and scrap cannot be treated as manufactured exempted goods for Rule 6 reversals. The Tribunal also cited a circular from 2003 clarifying that no credit reversal is required on waste packing materials of inputs, indicating consistency in such matters. The Appellant's compliance through option and final determination letters for credit reversal was duly noted, with no objections raised by the Revenue, indicating acceptance of the manner of computing reversal.

Conclusively, the Tribunal found the impugned order lacking merit, as the duty demand was not sustained, rendering the interest and penalty demands unsustainable. The appeal was allowed in favor of the Appellant, with any consequential relief granted.