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2004 (11) TMI 229 - AT - Central ExciseCenvat/Modvat vis-a-vis Exemption - Applicability of Rule 57AD/57CC/Rule 6 of the Central Excise Rules 1944 and the Cenvat Credit Rules 2001 - excise duty on paper manufactured using unconventional raw materials - demand for reversal of 8% of the value of exempted final products cleared during a specific period - HELD THAT - In a general notification if exemption is allowed for certain goods on condition that input credit is not taken in respect of the goods where such restriction is not given the assessee can simultaneously avail the input credit and also clear the goods without payment of duty untouched by the bar of the Rule 57AD/57CC/Rule 6 of the Cenvat Credit Rules. The decision of the Hon ble Supreme Court in case of Orissa Extrusions v. CCE Bhubaneswar 1999 (11) TMI 68 - SUPREME COURT is binding on all the quasi judicial authorities. The ratio of the Supreme Court decision is clearly applicable to the present case as the facts are similar. Rule 57AD/57CC/Rule 6 are only extensions of Rule 57C. When Rule 57C is not applicable if it follows that Rule 57CC also will not be applicable as both the rules deal with taking Modvat credit on inputs used for goods cleared at nil rate of duty. Therefore the contention of learned SDR cannot be sustained. Thus we allow the appeal.
Issues Involved:
The issues involved in this case include the applicability of Rule 57AD/57CC/Rule 6 of the Central Excise Rules, 1944 and the Cenvat Credit Rules, 2001 in relation to the exemption of excise duty on paper manufactured using unconventional raw materials, the interpretation of exemption notifications in light of input credit availed, and the demand for reversal of 8% of the value of exempted final products cleared during a specific period. Details of the Judgment: 1. The appellants, engaged in the manufacture of Paper and Paperboards, were entitled to full exemption of excise duty on the first 3500 MTs of paper cleared under a relevant Notification. They had reversed 8% of the sale price at the time of clearance due to the inability to maintain separate accounts, as per Rule 57AD/57CC [Rule 6 of the present] Central Excise Rules, 1944. However, following a Supreme Court decision, they believed this reversal was not required and filed a refund claim for the amount debited. The Commissioner demanded an amount equal to 8% of the value of exempted final products cleared during a specific period, along with interest under Section 11AB of the Central Excise Act, 1944, leading to a challenge by the appellants against the Commissioner's order. 2. The appellants' representatives relied on a Supreme Court decision regarding the interpretation of an exemption notification exempting certain products from Central Excise Duty. The Court clarified that certain products would not be entitled to exemption if input credit is availed, but this condition did not apply to all products listed in the notification. The representatives argued that if an exemption notification allows a product to be exempt even with input credit, rules like Rule 57C, 57AD/57CC, or Rule 6 of the Cenvat Credit Rules would not be applicable. They contended that the appellants were entitled to full exemption regardless of input credit taken, based on the notification applicable to their product. 3. The Department's representative argued that the Supreme Court decision should not be extended to Rule 57AD/57CC/Rule 6 of the Cenvat Credit Rules, emphasizing the specific context in which the Court's decision was referenced. However, the Tribunal considered the submissions and concluded that if a general notification allows exemption without restricting input credit, the assessee can avail input credit and clear goods without payment of duty, unaffected by rules like Rule 57AD/57CC/Rule 6. The Tribunal found the Supreme Court decision binding and applicable to the case, as the facts aligned. Therefore, the appeal was allowed based on the understanding that Rule 57AD/57CC/Rule 6 would not be applicable when Rule 57C does not apply, as they are extensions of the same rule.
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