2009 (3) TMI 370 - AT - Central Excise

Reversal of credit on inputs attributable to waste which is generated during manufacturing duty paid inputs used for manufacture of Gelatin Capsules and gelatin mass waste arose during course of manufacture - C.B.E. & C. Circular dated 3-4-2000. made clear that Cenvat credit shall be admissible in respect of the amount of inputs contained in any waste refuse or by-product. This in itself is sufficient for the appellants not to reverse any Cenvat credit on inputs attributable to the waste that is generated in their factory premises during the course of manufacturing Credit is not required to be reversed Assessee s appeal s allowed

Summary

Issues Involved:
1. Reversal of CENVAT Credit on inputs contained in Gelatin Mass Waste.
2. Interest on the amount of duty determined.
3. Imposition of penalty under Central Excise Act and Cenvat Credit Rules.

Issue-wise Detailed Analysis:

1. Reversal of CENVAT Credit on inputs contained in Gelatin Mass Waste:
The primary issue was whether the appellant was required to reverse the CENVAT credit availed on inputs contained in Gelatin Mass Waste, which was destroyed during the manufacturing process. The appellant argued that there was no need to reverse the CENVAT credit as remission and CENVAT credit are distinct concepts. They relied on the Larger Bench decision in Grasim Industries Ltd. v. CCE, Indore, which held that there is no provision for reversal of CENVAT credit on goods for which remission was granted. The appellant also cited Rule 57D of the Central Excise Rules, 1944, which states that credit should not be denied on inputs contained in waste, refuse, or by-products arising during the manufacture of the final product. The Tribunal agreed with the appellant, noting that the CBEC Circular dated 3-4-2000 clarified that CENVAT credit is admissible on inputs contained in waste. Consequently, the Tribunal found the demand for reversal of CENVAT credit to be incorrect and set aside the impugned order.

2. Interest on the amount of duty determined:
The show cause notices demanded interest on the duty determined, as per Section 11AB of the Central Excise Act, 1944. However, since the Tribunal concluded that the demand for reversal of CENVAT credit was incorrect, the associated interest demand was also deemed unwarranted. Thus, the Tribunal did not uphold the interest demand.

3. Imposition of penalty under Central Excise Act and Cenvat Credit Rules:
The show cause notices also proposed penalties under Section 11AC of the Central Excise Act, 1944, and relevant rules of the Cenvat Credit Rules. The Adjudicating Authority had imposed penalties on the appellant for irregularly availing CENVAT credit. However, since the Tribunal found that the appellant was not required to reverse the CENVAT credit, the basis for imposing penalties was invalid. Consequently, the penalties imposed were set aside.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order that demanded reversal of CENVAT credit, interest, and penalties. The Tribunal's decision was based on the interpretation of Rule 57D of the Central Excise Rules, 1944, and the CBEC Circular dated 3-4-2000, which clarified that CENVAT credit is admissible on inputs contained in waste generated during the manufacturing process. The Tribunal's operative portion was pronounced in open court at the conclusion of the hearing.