2020 (3) TMI 1053 - HC - Central Excise

CENVAT Credit - goods which were finally cleared were exempted - benefit of Rule 6(3) of the Cenvat Credit Rules - Whether the benefit of rule 6(3) of the Cenvat Credit Rules is available to the assessee, irrespective of his conduct and malafide intention to avail cenvat credit on the inputs used in manufacturing of exempted goods? HELD THAT - There is no dispute raised on the fact that till 20.8.2012, the nature of pipes manufactured was not determined as exempt because GMADA was not granted exemption certificate. The respondents were not maintaining separate books of account. The goods cleared were on payment/adjustment of duty under Rule 6(3) and also dutiable goods albeit in small ratio. The finding recorded by the Tribunal that dutiable goods were cleared on 5.11.2012 has not been challenged - The contentions raised by learned counsel for the appellant are not well founded. Rule 6(2) provides no minimum ratio for the manufacture of exempted and dutiable goods. It deals with manufacturing of exempted and duty chargeable goods and in case of non-maintaining of separate accounts, then Rule 6(3) comes into operation and as per first option the manufacturer is liable to pay 6% of the value of exempted goods. The submission that from September to 4.11.2012, WCL was only manufacturing exempted goods is merely on presumptions and the argument falls flat in view of the finding recorded by the Tribunal that on 5.11.2012 the goods were cleared on payment of duty. Without there being any manufacturing of dutiable goods prior to 4.11.2012, the goods could not have been cleared on 5.11.2012 on payment of duty. More-so, when clearance and supply of dutiable goods is accepted and there is no denial to the fact that a purchase order existed for supply of dutiable goods, on mere assumptions the intention cannot be determined or it can be concluded that the conduct was fraudulent - The authorities have also not appreciated the difference in manufacture and clearance of goods. It cannot be concluded that WCL till 04.11.2012 was indulging only in manufacture of exempted goods. No perversity has been pointed out in the order - Appeal dismissed - decided against appellant.

Summary

Issues:
Appeals under Section 35-G of the Central Excise Act, 1944 against order dated 10.8.2016; Questions of law regarding availing Cenvat Credit; Manufacturing of exempted and dutiable goods; Interpretation of Rule 6(1) to (3) of the Cenvat Credit Rules.

Analysis:

The High Court of Punjab & Haryana heard appeals under Section 35-G of the Central Excise Act, 1944 against an order dated 10.8.2016 by the Customs, Excise & Service Tax Appellate Tribunal. The appeals raised substantial questions of law concerning the availing of Cenvat Credit under the Cenvat Credit Rules. The core issue revolved around whether the respondent, aware of goods being exempted, could claim Cenvat Credit under Rule 6(3) despite the exempted nature of the final goods cleared. The Tribunal's order was challenged based on the grounds of alleged surmises and conjectures leading to a perverse decision. The Tribunal's failure to appreciate evidence on record and the respondent's awareness of the exemption certificate were key points of contention.

The case involved M/s Welspun Project Ltd. engaged in manufacturing M.S. Pipes, receiving orders from GMADA subject to exemption under a specific notification. The dispute arose from the period between September 2012 and June 2013, during which the respondent claimed manufacturing and supplying exempted dutiable goods. The Commissioner of Central Excise held that Cenvat Credit on inputs was wrongly availed, leading to the appeals before the Tribunal. The Tribunal's decision in favor of the respondent prompted the current appeals before the High Court.

The crux of the legal argument focused on Rule 6(1) to (3) of the Cenvat Credit Rules. Rule 6(1) prohibits Cenvat Credit on inputs used in the manufacture of exempted goods, with exceptions outlined in sub-rule (2) for manufacturers involved in both dutiable and exempted goods. Sub-rule (3) provides options for manufacturers not maintaining separate accounts, including paying 6% of the value of exempted goods. The appellant contended that until November 4, 2012, the respondent was only manufacturing exempted goods, thus ineligible for Cenvat Credit under Rule 6(3). However, the Tribunal's findings of dutiable goods clearance on November 5, 2012, challenged this argument.

The High Court dismissed the appeals, emphasizing that the Tribunal's findings were based on facts and not speculative presumptions. The Court rejected the appellant's assertions of fraudulent conduct or malafide intentions, noting the absence of evidence supporting such claims. The Court upheld the Tribunal's decision, stating that no perversity was identified in the order. Consequently, no interference was warranted, and the appeals were dismissed.