2015 (7) TMI 225 - AT - Central Excise

Denial of CENVAT Credit - Exemption under notification no. 6/06-CE dated 1/03/2006 - Non maintenance of separate accounts - Held that - When the goods manufactured into India have been supplied against international competitive bidding, the same would be eligible for full duty exemption under notification no. 6/06-CE, if the same satisfy the condition prescribed in the notification that the same goods, if imported into India are fully exempt from customs duty as well as additional customs duty. In terms of Clause (vii) of Rule 6(6), the provisions of sub rule (1) (2), (3) and (4) are not applicable in respect of such goods. - Rule 6 of the cenvat credit Rules is in respect of the goods manufactured in India and this rule, in general, contains provisions regarding denial of cenvat credit in respect of inputs/ input services which have gone into the manufacture of exempted final products or exempted output services. Sub rule 6 of Rule 6 enumerates the situations in which the cenvat credit would be available in respect of inputs/Input services even if the same have been used in or in relation to manufacture of final product which have been cleared at nil rate of duty or have been cleared without payment of duty like clearances for export under bond, supplies 100% EOU/SEZ units etc. There is nothing in this sub rule form which it can be inferred that clause-(vii) is applicable to the goods imported into India. In our view, the Review order passed by two senior Chief Commissioners is an absurd order passed with absolutely no application of mind and as such there is absolutely no merit in this appeal filed by the Revenue. - decided against Revenue.

Summary

Issues:
- Interpretation of Rule 6(6)(vii) of the Cenvat Credit Rules, 2004 regarding exemption from duty for goods supplied against international competitive bidding.
- Applicability of Rule 6 provisions to goods manufactured in India supplied at nil rate of duty under notification no. 6/06-CE.

Analysis:
1. Interpretation of Rule 6(6)(vii):
The case involved a dispute where the respondent supplied goods against international competitive bidding at nil rate of duty. The Department contended that Rule 6(6)(vii) of the Cenvat Credit Rules, 2004, exempting excisable goods from duty if supplied against international competitive bidding, only applied to imported goods. However, the respondent argued that this provision applied to goods manufactured in India as well. The Tribunal analyzed the language of Rule 6(6)(vii) and concluded that the provision exempted excisable goods, whether imported or manufactured in India, supplied against international competitive bidding. The Tribunal emphasized that the clause should be read in conjunction with the main provision of Rule 6, which pertains to goods manufactured in India. The Tribunal found the Department's interpretation to be incorrect and dismissed the appeal filed by the Revenue.

2. Applicability of Rule 6 Provisions:
The Tribunal further delved into the applicability of Rule 6 provisions to the goods manufactured in India supplied at nil rate of duty under notification no. 6/06-CE. It was observed that the respondent utilized common cenvat credit for manufacturing both dutiable and exempted final products. The Tribunal highlighted that Rule 6 of the Cenvat Credit Rules, 2004, addresses situations where a manufacturer uses common inputs to produce both dutiable and exempted goods. Subsequent rules specify the consequences if a manufacturer fails to maintain separate accounts for such inputs. The Tribunal clarified that when goods manufactured in India are supplied against international competitive bidding, they are eligible for full duty exemption under the notification. Therefore, the provisions of Rule 6(6)(vii) exempting such goods from certain rules apply, irrespective of whether the goods are imported or domestically produced. The Tribunal criticized the review order passed by senior Chief Commissioners for lacking merit and dismissed the Revenue's appeal.

In conclusion, the Tribunal's judgment clarified the interpretation of Rule 6(6)(vii) and affirmed that the exemption from duty for goods supplied against international competitive bidding applies to both imported and domestically manufactured goods. The Tribunal emphasized the importance of analyzing the provisions within the context of the main rule and criticized the Department's interpretation as erroneous. The decision highlighted the need for a comprehensive understanding of the rules governing duty exemptions and cenvat credit utilization in the manufacturing process.