2006 (10) TMI 15 - AT - Central Excise

Central Excise Cenvat credit Credit taken on RFO, LDO and furnace oil used as fuel in the manufacture of exempted as well as dutiable final goods, not deniable

Summary

Issues:
1. Availment of modvat credit on Furnace Oil for manufacturing exempted goods.
2. Interpretation of Rule 6 (1) and Rule 57AD of Cenvat Credit Rules, 2001.
3. Applicability of the Division Bench decision in Navsari Oil Products Ltd. case.

Analysis:

Issue 1: The appeal challenged the order setting aside the duty confirmation and penalty imposition related to the availment of modvat credit on Furnace Oil for manufacturing exempted goods. The respondent contended that Rule 6 (1) excludes fuel from its application, thus justifying their resistance to the show cause notice.

Issue 2: The learned Commissioner (Appeal) highlighted that Rule 57AD and Rule 6 (2) of the Cenvat Credit Rules specifically exclude inputs, including fuel like RFO, LDO, and Furnace Oil, used in the manufacture of both dutiable and exempted goods. The Commissioner's order emphasized that the appellant was not liable to reverse the credit taken on these inputs when used as fuel for exempted goods production.

Issue 3: The judgment referred to the Division Bench decision in the Navsari Oil Products Ltd. case, which established that modvat credit is not required to be reversed for inputs used as fuel in manufacturing exempted goods. The case discussed the exception created for fuel as an input and concluded that the appellant was not liable to reverse the credit or pay duty proportionate to the use of furnace oil in the manufacture of goods cleared without payment of duty.

In conclusion, the appellate tribunal dismissed the appeal, upholding the correctness of the impugned order based on the Division Bench decision's applicability. The judgment reaffirmed that the exclusion of inputs used as fuel for both dutiable and exempted goods production justified the respondent's position regarding the availment of modvat credit on Furnace Oil.