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2014 (8) TMI 248 - AT - Central ExciseCENVAT credit - respondent was directed to pay the amount of ₹ 24,74,092.20 being 8% of the value of clearance of Wet lapped bagasse pulp for the period July 2000 to December 2001 under Rule 57AD of the Central Excise Rules, 1944 and Rule 6(3)(b) of CENVAT Credit Rules, 2001 - adjudicating authority dropped the proceedings - Held that - Respondents had reversed the credit attributable to inputs used in the manufacture of wet lapped chemical bagasse pulp removed during the material period and thereafter, they started maintaining separate accounts of inputs used in the exempted final product. We find that the Hon ble Karnataka High Court in the cases of CCE Vs. Himalaya Drug Company - 2011 (2) TMI 1165 - KARNATAKA HIGH COURT and CCE Vs. Kudremukh Iron & Steel Co. Ltd. - 2011 (4) TMI 950 - KARNATAKA HIGH COURT held that common inputs used in the manufacture of dutiable and exempted final products, proportionate credit to use of inputs in exempted products is reversed, there is no requirement to reverse 8% of the price of the exempted goods, even if they had not maintained separate accounts by them. We have also noticed that Rule 57AD and Rule 6 was retrospectively amended by Finance Act, 2010 and once the CENVAT credit taken is reversed there is no liability to pay the amount of 8% of the price of the exempted goods. - Decided against Revenue.
Issues:
- Appeal against dropping of proceedings by Commissioner of Central Excise - Availing MODVAT/CENVAT credit for inputs used in manufacturing - Show Cause Notice for payment of amount and penalty - Interpretation of Rule 57AD of Central Excise Rules, 1944 and Rule 6(3)(b) of CENVAT Credit Rules, 2001 - Requirement to reverse credit for exempted products - Retrospective amendment of Rule 57AD and Rule 6 by Finance Act, 2010 Analysis: The appeal was filed by the Revenue against the dropping of proceedings by the Commissioner of Central Excise concerning the availing of MODVAT/CENVAT credit for inputs used in the manufacturing process. The respondent, engaged in the manufacture of Paper and Newsprint, availed credit for inputs used in the production of both dutiable and exempted products. The issue arose when the respondent removed a non-dutiable product, "Lapped Chemical Bagasse Pulp," and availed credit for inputs used in the manufacturing process. The Revenue issued a Show Cause Notice directing the respondent to pay a specified amount along with penalty and interest. Upon examination of the impugned order, it was observed that the respondents had reversed the credit attributable to inputs used in the manufacture of the exempted final product. The Tribunal referred to judgments by the Hon'ble Karnataka High Court, which held that if common inputs were used in the production of both dutiable and exempted final products and proportionate credit for inputs used in exempted products was reversed, there was no requirement to reverse a specific percentage of the price of the exempted goods, even in the absence of separate accounts. Additionally, it was noted that Rule 57AD and Rule 6 were retrospectively amended by the Finance Act, 2010, and once the CENVAT credit taken was reversed, there was no liability to pay the specified amount related to exempted goods. Consequently, the Tribunal found no merit in the Revenue's appeal and upheld the impugned order, rejecting the appeal filed by the Revenue. The operative portion of the order was pronounced in open court on a specified date in 2014.
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