2007 (11) TMI 222 - AT - Central Excise

Credit availed on granules used in mfg. of final good waste & scrap generated during manufacture - waste is an excisable commodity & is removed on payment of duty so there is no requirement of reversing the credit on it which is cleared for home consumption when assessee has reversed credit on inputs contained in goods to be exported to claim drawback, there is no justification for demanding credit availed by the appellants on the scrap generated, which was only cleared on payment of duty

Summary

Issues:
1. Availing Cenvat credit and Drawback simultaneously.
2. Reversal of Cenvat credit on exported products.
3. Treatment of scrap as an excisable commodity.
4. Demand for reversal of Cenvat credit on scrap generated.

Analysis:

Issue 1: Availing Cenvat credit and Drawback simultaneously
The appellants utilized granules and availed Cenvat credit for manufacturing final products exported under Drawback claim. However, as per rules, they cannot avail both Cenvat credit and Drawback. The appellants reversed Cenvat credit on the quantity of input contained in the exported product but did not reverse credit on the scrap generated. The Revenue alleged wrongful availment of Cenvat credit and initiated proceedings.

Issue 2: Reversal of Cenvat credit on exported products
The appellants argued that they followed the correct procedure by availing credit on inputs and reversing it on exported products. They contended that the scrap generated, being an excisable commodity, was removed on payment of duty, justifying their entitlement to Cenvat credit on the waste.

Issue 3: Treatment of scrap as an excisable commodity
The Departmental Representative claimed that since 110 Kgs. of raw material were required to produce 100 Kgs. of finished product, the credit on the entire 110 Kgs. should be reversed, including on the 10 Kgs. of scrap generated. However, the Tribunal noted that waste being an excisable commodity removed on duty payment allowed for availing input credit.

Issue 4: Demand for reversal of Cenvat credit on scrap generated
After careful consideration, the Tribunal found that the appellants correctly availed input credit on raw materials and reversed it for exported products. The Tribunal ruled that demanding reversal of Cenvat credit on scrap cleared on payment of duty had no merit. Consequently, the appeal was allowed with any necessary consequential relief.

This judgment clarifies the treatment of scrap as an excisable commodity, the procedure for availing Cenvat credit on exported products, and the permissible actions regarding credit reversal.