2024 (5) TMI 665 - AT - Central Excise

CENVAT Credit - inputs used in the manufacture of both e-bikes (exempt) and e-bikes parts (taxable) are common - applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 or Rule 11(3) of the Cenvat Credit Rules, 2004 - HELD THAT - This issue is no longer res integra being decided in favour of the appellant by this Bench of the Tribunal in M/S AVON CYCLES LIMITED AND M/S HERO CYCLES LIMITED VERSUS C.C.E, LUDHIANA 2016 (9) TMI 628 - CESTAT CHANDIGARH where the appellant was manufacturing both exempted goods i.e. the e-bikes and dutiable goods i.e. the parts of e-bikes; it is not the case of the Department that the appellant is only manufacturing exempted goods and therefore, the contention of the appellant that they are following the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004 is acceptable. There are no applicability of Rule 11(3) of the Cenvat Credit Rules, 2004 in the instant case. This bench of the Tribunal in M/S AVON CYCLES LIMITED AND M/S HERO CYCLES LIMITED held that ' As we hold that the provisions of Rule 6(3) are applicable to the facts of the present case. Therefore, we hold that provisions of Rule 11(3) of the Cenvat Credit Rules are not applicable to the facts of the present case.' The impugned order is not sustainable and requires to be set aside - appeal allowed.

Summary

Issues involved:
The appeal was against the order passed by the Commissioner (Appeals) Central Excise, Chandigarh regarding the recovery of central excise duty on e-bikes and parts thereof.

Summary:

Issue 1: Cenvat Credit on exempted goods
The appellant contended that Cenvat Credit on inputs is not admissible when final products are exempted from duty, as per Rule 6(1) and explanation to Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant argued that since inputs for both dutiable and exempted goods were common and separate accounts were not maintained, they were paying an amount as per Rule 6(3)(i) of the Cenvat Credit Rules, 2004.

Issue 2: Applicability of rules
The Department argued that the appellant did not follow Rule 3(4) of the Cenvat Credit Rules, 2004, leading to a show cause notice for recovery of central excise duty. However, the Tribunal found that the appellant was manufacturing both exempted and dutiable goods, and therefore, Rule 6(3) applied instead of Rule 11(3) of the Cenvat Credit Rules, 2004.

Decision:
The Tribunal referred to a previous decision where it was held that Rule 6(3) applied to the appellant as they were manufacturing both types of goods. The impugned order was set aside, and the appeal was allowed in favor of the appellant.

(Order pronounced in the open court on 14.05.2024)