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2025 (4) TMI 631 - AT - Central ExciseReversal of CENVAT Credit - requirement to pay 10%/5% of the value of the chilli seeds and chilli de-oiled cake/marigold during the relevant period from June 2007 to September 2011 - product chilli seeds and chilli de-oiled cake which emerged during the process of manufacture of the said Oleoresin were cleared by the appellant without payment of duty - failure to comply with provisions of Rule 6(3) of the Cenvat Credit Rules 2004 - availment of inadmissible credit on Oleoresin paprika received in finished condition which are later exported - HELD THAT - Undisputed facts are that the chilli seeds are emerged from the raw material i.e. raw chilli before being subjected to any process and the appellants do not use any input till the chilli seeds separated from the raw chilli a claim not rebutted by the Department; thus they have not availed cenvat credit on any of the inputs in the manufacture of chilli seeds. Also it is not in dispute that they have reversed Rs.98, 640/- along with interest of Rs.38, 977/- proportionate cenvat credit attributable to input services used in the generation of chilli seeds cleared without payment of duty. Also it is not in dispute that the de-oiled cake is a by-product / waste and cleared without payment of duty. The learned Commissioner did not accept the reversal of credit solely on the ground that it was made on 11.05.2012 i.e. after period stipulated in the Finance Act 2010. There are no merit in the said observation of the learned Commissioner inasmuch as the show-cause notice was issued to the appellant on 10.05.2012 and they have immediately reversed proportionate credit on 11.05.2012 attributable to the input services used in the manufacture of exempted product viz. chilli seeds. Further it has been held in a number of cases that reversal of cenvat credit attributable to exempted goods would suffice compliance of Rule 6(3) of the CCR. Reversal of cenvat credit on the de-oiled cake which emerged during the course of manufacture of Oleoresin - HELD THAT - It is waste product; hence cenvat credit attributable to such waste are not required to be reversed in view of the principle of law laid down by the Tribunal and High Court in the case of Rallis India Ltd. Vs UOI 2008 (12) TMI 46 - HIGH COURT BOMBAY and M.K. Agrotech (P) Ltd. 2006 (12) TMI 37 - CESTAT BANGALORE . Reversal of credit of Rs.3, 15, 028/- which has been received by the appellant in finished condition from M/s. Kancor Ingredients Ltd. Ernakulam and later exported under Rule 16 of the CCR 2002 - HELD THAT - The issue of reversal of credit of Rs.3, 15, 028/- which has been received by the appellant in finished condition from M/s. Kancor Ingredients Ltd. Ernakulam and later exported under Rule 16 of the CCR 2002 also cannot be denied in view of the judgment of this Tribunal in the case of CCE Ahmedabad Vs. Tapsheel Enterprises 2007 (5) TMI 97 - CESTAT AHMEDABAD . Conclusion - i) Reversal of proportionate cenvat credit attributable to exempted goods suffices compliance with Rule 6(3) of the CCR 2004. ii) By-products or waste do not necessitate credit reversal under Rule 6(3). iii) Goods exported in finished condition do not require cenvat credit reversal under Rule 16 of the CCR 2002. The impugned order is set aside and the appeal is allowed.
ISSUES PRESENTED and CONSIDERED
The primary issues considered in this appeal were: (i) Whether the appellants are required to pay 10%/5% of the value of the chilli seeds and chilli de-oiled cake/marigold during the relevant period from June 2007 to September 2011. (ii) Whether the appellants are required to reverse the credit availed on goods which were exported. ISSUE-WISE DETAILED ANALYSIS Issue (i): Payment of 10%/5% of the value of chilli seeds and chilli de-oiled cake/marigold Relevant legal framework and precedents: The legal framework involves Rule 6(3) of the Cenvat Credit Rules, 2004, which mandates the reversal of cenvat credit or payment of an equivalent amount when exempted goods are manufactured using common inputs. The appellants argued that the chilli seeds and de-oiled cake are by-products or waste, and thus, Rule 6(3) should not apply. They relied on precedents such as Rallis India Ltd. Vs UOI and other similar cases that supported the non-applicability of Rule 6(3) to by-products or waste. Court's interpretation and reasoning: The Tribunal found that the chilli seeds emerged from raw chillies before any processing involving cenvat credit inputs, and thus, no cenvat credit was availed for their manufacture. The Tribunal also noted that the de-oiled cake was a by-product or waste, supporting the appellant's claim that Rule 6(3) did not apply. Key evidence and findings: It was undisputed that the appellants did not use any inputs subject to cenvat credit until after the chilli seeds were separated. The appellants had already reversed Rs.98,640/- with interest for the proportionate credit attributable to input services used in generating chilli seeds. Application of law to facts: The Tribunal applied the principle that reversal of cenvat credit attributable to exempted goods suffices compliance with Rule 6(3). They referenced past decisions that supported this interpretation. Treatment of competing arguments: The Department's argument that the reversal was untimely was rejected, as the Tribunal found the reversal was made promptly after the show-cause notice. Conclusions: The Tribunal concluded that the demand for 10%/5% of the value of chilli seeds and de-oiled cake was unsustainable. Issue (ii): Reversal of credit on exported goods Relevant legal framework and precedents: The issue revolved around the reversal of cenvat credit on goods received in finished condition and later exported, governed by Rule 16 of the CCR, 2002. The appellants argued that the reversal was unnecessary based on precedents such as S. Kumars Nationwide Ltd. Vs. CCE, Indore. Court's interpretation and reasoning: The Tribunal agreed with the appellants, citing the settled position that reversal of cenvat credit is not required for goods exported in finished condition. Key evidence and findings: The Tribunal relied on previous judgments that established the non-requirement of credit reversal for exported goods. Application of law to facts: The Tribunal applied the principle that goods exported in finished condition are exempt from credit reversal requirements. Treatment of competing arguments: The Department's position was not substantiated with sufficient counter-precedents, leading to the Tribunal's decision favoring the appellants. Conclusions: The Tribunal held that the reversal of credit on exported goods was not warranted. SIGNIFICANT HOLDINGS The Tribunal established core principles that: - Reversal of proportionate cenvat credit attributable to exempted goods suffices compliance with Rule 6(3) of the CCR, 2004. - By-products or waste do not necessitate credit reversal under Rule 6(3). - Goods exported in finished condition do not require cenvat credit reversal under Rule 16 of the CCR, 2002. The Tribunal set aside the impugned order and allowed the appeal, granting consequential relief as per law.
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