2012 (12) TMI 942 - AT - Central Excise

Duty demand - Goods cleared without payment under Notification No.6/2006 CE - Benefit of Notification No.67/95 CE dt. 16/03/1995 - Held that - Notification No.67/95-CE ibid, it appears that the bar created therein is not applicable to the inputs used in or in relation to the manufacture of exempted final products cleared by a manufacturer of such exempted final products as well as dutiable final products. In other words, where the manufacturer manufactures both dutiable and exempted final products and uses the inputs in question in the manufacture of the exempted final products, he is entitled to the benefit of exemption from payment of duty on such inputs in terms of the opening paragraph of the Notification. This right is not hit by the opening portion of the proviso to the Notification as the manufacturer is squarely covered by the exception carved out of the proviso vide clause (vi) under the proviso. The Department, it appears, would like to drive the assessee out of the purview of this exception on the ground that the latter had not discharged the obligation prescribed in Rule 6 of the CENVAT Credit Rules 2004. We have already held that the assessee did not have any liability under sub-rules (1) to (4) of Rule 6 inasmuch as these sub-rules were not applicable, by virtue of sub-rule (6), to the assessee who were clearing their exempted final products against international competitive bidding in terms of Notification No.6/2006-CE ibid. In other words, a conjoint reading of sub-rule (6) of Rule 6 of the CENVAT Credit Rules 2004 and clause (vi) under the proviso to Notification No.67/95-CE ibid would show that the assessee s claim for exemption from payment of duty on copper wire under the Notification was not hit by the opening portion of the proviso to the Notification - assessee was not liable to pay CE duty on copper wire manufactured and captively used in the manufacture of insulated (power) cables in the factory during the material period - Decided in favour of assessee.

Summary

Issues:
- Challenge against CE duty demands for two specific periods
- Challenge against connected penalties
- Interpretation of Notification No.6/2006 CE and its impact on duty liability
- Analysis of Rule 6 of the CENVAT Credit Rules 2004
- Application of Notification No.67/95 CE and its proviso on duty exemption for inputs

Analysis:
The judgment involves two appeals challenging CE duty demands and connected penalties for specific periods related to the manufacture of copper wire used in insulated cables. The Revenue contended that duty was payable on the copper wire as the final products were cleared without payment of duty under Notification No.6/2006 CE. The appellant argued that Rule 6 of the CENVAT Credit Rules 2004 did not apply to them due to clearance against international competitive bidding, exempting them from maintaining separate accounts for inputs. The Tribunal agreed, noting that the final products' duty exemption under Notification No.6/2006 CE exempted the appellant from Rule 6 obligations.

Regarding Notification No.67/95 CE, which exempted inputs used in manufacturing final products, the Revenue argued against duty exemption for copper wire under the proviso to the Notification. The proviso excluded duty exemption for inputs used in exempted final products unless certain conditions were met. The Tribunal analyzed the proviso and held that the appellant, manufacturing both dutiable and exempted final products, was entitled to duty exemption for inputs used in exempted final products. The Tribunal emphasized that the appellant's claim for duty exemption on copper wire was valid, considering the exemption under Notification No.6/2006 CE and the exception in the proviso to Notification No.67/95 CE.

In conclusion, the Tribunal ruled in favor of the appellant, stating that they were not liable to pay CE duty on the copper wire used in manufacturing insulated cables. The demands and penalties were set aside, and both appeals were allowed. The judgment highlighted the interplay between specific notifications, rules, and exemptions in determining duty liability, providing clarity on the appellant's entitlement to duty exemption based on the relevant legal provisions.