2019 (5) TMI 1344 - AT - Central Excise

CENVAT Credit - manufacture of dutiable goods as well as exempted goods - export of goods - reversal of inputs proportionate to their use in manufacture of dutiable goods or exempted goods, which are exported - HELD THAT - In the assessee s own case ASTRIX LABORATORIES LTD., VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, HYDERABAD-I AND VICE VERSA 2018 (3) TMI 837 - CESTAT HYDERABAD , this Bench has decided that the assessee can take credit in proportionate to the quantity of inputs used for manufacture of dutiable goods. Availability of CENVAT Credit on exempted goods which are exported out of India - HELD THAT - The Hon ble High Court of Bombay has, in the case of REPRO INDIA LTD. VERSUS UNION OF INDIA 2007 (12) TMI 209 - BOMBAY HIGH COURT decided that such credit is available in Rule 6(6)(v) of CCR 2004. Goods cleared under Chapter X procedure - HELD THAT - This Bench has, relying upon the judgment of Hon ble High Court of Rajasthan in the case of Hindustan Zinc Limited vs. Union of India 2007 (1) TMI 94 - HIGH COURT RAJASTHAN upheld by Hon ble Apex Court at 2014 (5) TMI 253 - SUPREME COURT held that the goods cleared under Chapter X procedure are not exempted goods and there is no need to reverse credit under Rule 6(3)(i) of CCR 2004. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of CENVAT Credit on inputs proportionate to their use in manufacture of dutiable goods or exempted goods exported.
2. Maintainance of separate books of accounts for reversal of value of exempted goods.
3. Applicability of notification No. 24/2010 for availing CENVAT Credit on exempted goods exported.
4. Clarification on CENVAT Credit for goods cleared under Chapter X procedure.

Analysis:
1. The appellant contested the eligibility of CENVAT Credit on inputs used in manufacturing dutiable and exempted goods. They claimed to avail credit based on the actual consumption of inputs for each type of product. The appellant's method involved recording common inputs in inventory and taking credit only for the portion used for dutiable or exempted goods. The Tribunal noted previous judgments supporting this approach, allowing credit based on actual use rather than entire invoice amounts.

2. The issue of maintaining separate books of accounts for reversing a percentage of exempted goods' value was raised. The appellant argued that they did not avail CENVAT Credit on common inputs, only on the portion used for dutiable or exported exempted goods. Citing relevant case law, the appellant contended that when credit is based on actual usage, the requirement for reversal under Rule 6 does not apply.

3. Regarding the applicability of notification No. 24/2010 for availing CENVAT Credit on exempted goods exported, the appellant relied on a High Court decision stating that credit is available under Rule 6(6)(v) of CCR 2004. The Tribunal considered this argument and found in favor of the appellant, setting aside the demand, interest, and penalties imposed by the adjudicating authority.

4. The Tribunal addressed the issue of CENVAT Credit for goods cleared under Chapter X procedure. Relying on precedent, it was established that such goods are not considered exempted, leading to the conclusion that there is no requirement to reverse credit under Rule 6(3)(i) of CCR 2004. Based on settled legal principles and previous judgments, the Tribunal allowed the appeal, setting aside the impugned order in favor of the appellant.