2024 (12) TMI 735 - AT - Central Excise

Reversal of Cenvat credit in terms of Rule 6(3)(i) of CCR - non-maintenance of separate accounts for dutiable and exempted goods - tooling fixtures - HELD THAT - The identical issue as involved in the present case was already decided in favour of the assessee in the case of Needle Industries (India) Private Ltd. Versus Commissioner of Central Excise, Salem 2014 (8) TMI 980 - CESTAT CHENNAI where it was held that ' these items are intermediate products captively used in the manufacture of dutiable final product and therefore, Cenvat credit cannot be denied.' It is observed that the Appellant is also eligible to avail Cenvat Credit in terms of CBEC Circular No. 665/56/2002-CX dated 25.09.2002 wherein it was clarified that Cenvat credit should not be denied on the capital goods used in manufacturing of intermediate goods exempt from payment of duty which are used captively in the manufacture of finished goods chargeable to duty. The demand raised cannot sustain and requires to be set aside - Since the demand itself cannot be sustained, the invocation of extended period and imposition of penalty does not arise. The impugned Order-in-Original No. 02/2016(CE) dated 29.01.2016 is set aside - appeal is allowed.

Summary

Issues:
1. Reversal of Cenvat credit on tooling fixtures under Rule 6(3)(i) of CCR for non-maintenance of separate records for dutiable/exempted goods.

Detailed Analysis:

Issue 1: Reversal of Cenvat credit on tooling fixtures under Rule 6(3)(i) of CCR for non-maintenance of separate records for dutiable/exempted goods

The Appellant filed an appeal aggrieved by the Order-in-Original confirming a demand towards Cenvat Credit payable under Rule 6(3)(i) of Cenvat Credit Rules, 2004 (CCR) for the period from April 2010 to March 2014. The Appellant, engaged in manufacturing Motor Vehicle Cabins, received advances for manufacturing tools like Welding Fixtures & Tools, which were sold without payment of Central Excise duty and retained in the factory for cabin manufacture under exemption. The impugned order alleged non-payment of Excise duty on tooling advances, reversal of Cenvat credit for failure to maintain separate accounts, and wrong availment of credit on Goods and Transport Service. The Appellant contended that the extended period could not be invoked, and the duty under Rule 6(3)(i) of CCR did not apply to unconditionally exempted goods. The Appellant also argued that the Notification No. 67/95 exemption could not be extrapolated to the case. The Appellant claimed eligibility for Cenvat credit on inputs used in tool manufacture, citing CBEC Circular No. 665/56/2002-CX and relevant case laws.

The Tribunal analyzed the contentions and cited the case of Needle Industries (India) Private Ltd. v. CCE, Salem, where it was held that intermediate products captively consumed in the manufacture of dutiable final products are eligible for Cenvat credit. The Tribunal also referred to the CBEC Circular supporting the availability of credit on capital goods used in the manufacture of exempt intermediate products. Relying on the precedent and circular, the Tribunal concluded that the demand for reversal of Cenvat credit could not be sustained. Consequently, the impugned order was set aside, and the appeal was allowed, with no basis for invoking the extended period or imposing penalties.

In summary, the Tribunal ruled in favor of the Appellant, holding that the demand for reversal of Cenvat credit on tooling fixtures was not justified due to the Appellant's eligibility for Cenvat credit on inputs used in the manufacture of tools, as per relevant circulars and legal precedents. The Tribunal set aside the impugned order and allowed the appeal, emphasizing the inapplicability of the extended period and penalties due to the lack of merit in the demand itself.