2019 (4) TMI 745 - AT - Central Excise

100% EOU - CENVAT Credit - common inputs used for exempted and dutiable goods - non-maintenance of separate records - Rule 6 of CENVAT Credit Rules, 2004 - Held that - It is undisputed that the said bulk drug is eligible for exemption if cleared in DTA; also undisputed that appellant has been utilising common inputs for manufacturing of this bulk drug; has availed CENVAT Credit on the common inputs so used, but has not maintained separate accounts as required under Rule 6(2) of CCR 2004 - Both the lower authorities were correct in confirming the demands raised. Having not disputed that there is consumption of common inputs for manufacturing of bulk drug cleared, while clearing to DTA claiming exemption and not maintaining separate accounts, the confirmation of the demands under Rule 6(3) of CCR 2004 for an amount equivalent to 5% of the value of the exempted goods is correct and legal - Appeal dismissed - decided against appellant.

Summary

Issues:
- Interpretation of Rule 6 of CENVAT Credit Rules, 2004 regarding reversal of credit for exempted goods.
- Treatment of bulk drugs cleared to DTA at nil rate of duty as exempted/non-excisable goods.
- Requirement of maintaining separate accounts for common inputs used for exempted and dutiable goods.

Analysis:
The appeal in question challenged Order-in-Appeal No. 14/2012 (V-I) CE, dated 06.03.2012, concerning the appellant's clearance of bulk drugs "IOPAMIDOL" to DTA at nil rate of duty during the period of July 2009 to March 2010. The appellant claimed exemption for manufacturing these goods but faced a show cause notice for not maintaining separate accounts for common inputs used for both exempted and dutiable goods, leading to a demand for reversal of 5% of the value of the exempted goods. The appellant argued that the bulk drugs cleared to DTA should be considered exempted/non-excisable goods after paying duty on the inputs as per Notification No. 52/2003-Cus. However, both lower authorities upheld the demand, emphasizing the necessity of maintaining separate accounts as per Rule 6(2) of CENVAT Credit Rules, 2004.

The Tribunal analyzed the submissions and records, concluding that the demand for 5% of the value of "IOPAMIDOL" cleared in DTA was valid. The Tribunal noted that the bulk drug was eligible for exemption when cleared in DTA, and the appellant had availed CENVAT Credit on common inputs without maintaining separate accounts as required by Rule 6(2) of CCR 2004. The Tribunal found the appellant's arguments regarding the discharge of duty liability on inputs and the treatment of bulk drugs as exempted/non-excisable goods to be unacceptable. The Tribunal emphasized that the appellant's failure to dispute the consumption of common inputs for manufacturing the bulk drug and not maintaining separate accounts justified the confirmation of demands under Rule 6(3) of CCR 2004.

Ultimately, the Tribunal dismissed the appeal, stating that the appellant's arguments lacked merit. The impugned order was upheld, and the appeal was rejected, as the Tribunal found the lower authorities' decisions to be reasoned and legally sound. The judgment highlighted the importance of complying with Rule 6 of CENVAT Credit Rules, 2004 and maintaining proper accounts for common inputs used in manufacturing both exempted and dutiable goods to avoid demands for reversal of credit for exempted goods.