2006 (9) TMI 22 - AT - Central Excise

Central Excise Cenvat credit Assessee paid amount equal to 8% of value of exempted final goods Credit on inputs exclusively used in manufacture of exempted final products as well as common inputs used in manufacture of both dutiable and non-dutiable or exempted final goods, is allowable

Summary

Issues:
1. Contravention of Rule 6 of Cenvat Credit Rules, 2002 regarding the utilization of credit on inputs used in the manufacture of exempted goods.
2. Demand of irregularly availed Cenvat Credit and imposition of penalty.
3. Interpretation of Rule 57C (1) and Rule 57C (2) in relation to the payment of 8% on exempted final products.

Analysis:

Issue 1: Contravention of Rule 6 of Cenvat Credit Rules, 2002
The Appellants were found to have contravened the provisions of Sub-rule (1) of Rule 6 of Cenvat Credit Rules, 2002 by taking credit on inputs exclusively used in the manufacture of exempted final goods and utilizing that credit towards payment of duty on other final products. A Show Cause Notice was issued to the Appellants by the Assistant Commissioner of Customs & Central Excise, alleging the contravention and proposing the demand of irregularly availed Cenvat Credit, imposition of penalty, and recovery of interest.

Issue 2: Demand of irregularly availed Cenvat Credit and imposition of penalty
The Appellants argued that similar issues had been decided in their favor in previous cases, citing specific Final Orders as precedents. The Tribunal examined the Final Orders and held that the Appellants were not required to reverse the credit based on the precedent set in those orders. The Departmental view was reiterated by the learned JDR, but the Tribunal, following the precedent and legal interpretation, set aside the impugned orders and allowed the appeal with consequential relief, if any.

Issue 3: Interpretation of Rule 57C (1) and Rule 57C (2)
The Tribunal analyzed Rule 57C (1) and Rule 57C (2) in detail, emphasizing the requirement of paying 8% on exempted final products as mandated by Rule 57CC (1). The interpretation clarified that the payment of 8% under Rule 57CC (1) ensured compliance with the requirement of Rule 57C (1) on all inputs used in the manufacture of exempted final products, including both exclusive and common inputs. Relying on the ruling of the Tribunal in previous cases, the impugned orders were set aside, and the appeal was allowed with consequential relief, following the established legal interpretation.

In conclusion, the judgment addressed the contravention of Cenvat Credit Rules, the demand of irregularly availed credit, penalty imposition, and the interpretation of rules related to the payment on exempted final products. The decision was based on legal precedents, detailed analysis, and the specific provisions of the Cenvat Credit Rules and related regulations.