2023 (6) TMI 295 - AT - Central Excise

CENVAT Credit - interim product/intermediate goods - rubberised textile fabric - requirement to pay 8% of the value of exempted goods as duty - HELD THAT - The appellant had availed the credit in respect of input used in manufacturing of interim product i.e. rubberised textile fabric. The benefit of exemption was not admissible as the goods were liable to be charged at nil rate of duty. If no credit was taken moreover the said rubberised textile fabric being input used for manufacture of PSP which were cleared at nil rate of duty and consume for same purpose was not eligible for the benefit of exemption Notification No. 67/95-CE dated 16/03/1995. Therefore, the appellant was required to pay 8% of the value of PSP bed cleared by them without payment of duty. It is clear that the appellant has paid 8% of the value of the rubberized textile fabric which in turn in use for manufacture of PSP, therefore, as the appellant has paid 8% of the value of rubberized textile fabric, which means that appellant has not taken the Cenvat Credit of 8% of the value of rubberised textile fabric. The similar issue came up before Tribunal in the case of LIFE LONG APPLIANCES LTD. VERSUS COMMISSIONER OF C. EX., DELHI-III 2000 (4) TMI 90 - CEGAT, COURT NO. II, NEW DELHI where it was held that the appellant had satisfied the requirement of not taking Modvat Credit on the inputs used in the manufacture of exempted goods. Their case is specifically covered by Rule 57CC as well as the decision of Supreme Court with regard to not availing of Modvat Credit on inputs in the Chandrapur Magnet Wires (P) Ltd. case. The impugned order is, therefore, clearly erroneous. The appellant has paid 8% of the value of the exempted goods on which no credit has been taken by the appellant. Therefore, the appellant is not required to pay 8% of the value of PSP bed cleared by them. Therefore, impugned order is set aside - Appeal allowed.

Summary

Issues involved:
The issues involved in this case are the availment of credit for manufacturing exempted goods, eligibility for exemption under Notification No. 67/95-CE, and the requirement to pay duty on exempted goods.

Issue 1: Availment of credit for manufacturing exempted goods
The appellant had availed credit for manufacturing rubberized textile fabric, which was used in the production of pressure sore prevention beds (PSP beds) cleared at nil rate of duty. As the goods were liable to be charged at nil rate of duty, the benefit of exemption was not admissible. The appellant was required to pay 8% of the value of the PSP beds cleared without payment of duty. The appellant had paid 8% of the value of the rubberized textile fabric, indicating that they had not taken the Cenvat Credit of 8% of the value of the fabric. This issue was addressed in a similar case before the Tribunal where the payment of duty at 8% was considered as an adjustment of excess credit taken, satisfying the requirement of not availing Modvat Credit on inputs used in the manufacture of exempted goods.

Issue 2: Eligibility for exemption under Notification No. 67/95-CE
The appellant's case was similar to a previous case where the exemption claimed was subject to the condition that Modvat Credit should not have been taken on inputs used in the manufacture of exempted goods. The appellant paid Central Excise Duty of 8% as required under Rule 57CC, which allows for the adjustment of credit on inputs used in exempted final products. The appellant's compliance with Rule 57CC and the Supreme Court decision regarding not availing Modvat Credit on inputs supported their eligibility for exemption under Notification No. 67/95-CE. The Tribunal's decision in the previous case was affirmed by the Hon'ble Supreme Court, further validating the appellant's position.

Issue 3: Requirement to pay duty on exempted goods
Based on the discussion and findings, it was concluded that the appellant had paid 8% of the value of the exempted goods for which no credit had been taken. Therefore, the appellant was not required to pay 8% of the value of the PSP beds cleared by them. As a result, the impugned order was set aside, and the appeal was allowed with consequential relief, if any.

This judgment highlights the importance of compliance with rules regarding the availment of credit for manufacturing exempted goods and the eligibility criteria for exemptions under specific notifications. The decision provides clarity on the requirement to pay duty on exempted goods and the implications of not availing certain credits in the manufacturing process.