2009 (12) TMI 470 - AT - Central Excise

Cenvat - The respondents have been availing Cenvat credit on the inputs used in the manufacture of excisable goods. The department noticed that the respondents had taken Cenvat credit on an input which was used in the manufacture of final product which was totally exempted by Notification No. 6/2002-C.E., dated 1-3-2002, which is irregular though the respondents had reversed an amount equal to the 8% of the value of such exempted goods cleared. It was also noticed by the department that the respondent had cleared spent solvents and chemicals under commercial invoice without payment of duty. On these two allegations, show cause notice was issued to the respondent demanding duty and proposing to impose penalties and also seeking to demand interest. Held that - spent solvent and chemicals product arise during course of manufacture of bulk drug, not liable to duty. Further held that - revenue failed to ask why assessee had availed credit, when ER-1 return indicates reversal of 8% of value of exempted final products. Finding of Commissioner (Appeals) on limitation, correct. Demand held time barred.

Summary

Issues:
1. Availing Cenvat credit on exempted final products
2. Duty liability on spent solvents and chemicals

Availing Cenvat credit on exempted final products:
The appeal was against the Order-in-Appeal concerning the manufacturing of Bulk Drugs and P or P Medicaments. The respondents availed Cenvat credit on inputs used in the manufacture of excisable goods, including an input used in a final product exempted by Notification No. 6/2002-C.E. The department issued a show cause notice demanding duty, penalties, and interest. The Commissioner (Appeals) set aside the demand on the grounds of limitation and non-dutiable spent solvents. The Revenue contested this decision, arguing that Rule 6 of Cenvat Credit Rules, 2002, prohibits availing credit on inputs used in exempted final products. The respondents claimed they had submitted detailed statements indicating the exempted final product for which they reversed 8% credit. The Tribunal found that the Commissioner's decision on limitation was correct as the information was available in their returns, and the demand was time-barred.

Duty liability on spent solvents and chemicals:
The dispute centered on whether duty was payable on spent solvents and chemicals arising during the manufacture of bulk drugs. The respondents argued that these products did not get manufactured in their factory premises but arose during the manufacturing process. Citing precedent cases, the Tribunal found in favor of the respondents, stating that such products were not manufactured or excisable. The Tribunal upheld the Commissioner's decision, concluding that the appeal by the Revenue lacked merit. The impugned order was deemed correct and well-reasoned, leading to the rejection of the Revenue's appeal.

In conclusion, the Tribunal upheld the Commissioner's decision to set aside the demand on availed Cenvat credit for exempted final products and the duty liability on spent solvents. The Revenue's appeal was dismissed as lacking merit, and the impugned order was deemed valid and free from any defects.