2016 (12) TMI 150 - AT - Central Excise

CENVAT credit - inputs - palm oil and packing material - Vanaspati was exempted from payment of duty whereas fatty acid continued to attract Central Excise Duty - Held that - In this case till 28.02.2005, the respondent was not manufacturing exempted goods. W.e.f 01.03.2005, the vanaspati became exemption for the payment of duty therefore, from 01.03.2005, the respondent is required to maintain separate account of inputs used in manufacturing of dutiable as well as final exempted product, but the Ld. Commissioner (A) in the impugned order has observed that the cenvat credit on inputs lying in stock as contained in exempted final finished goods i.e. vanaspati lying in stock as on 01.03.2005 was not available to the respondent. The finding of the Ld. Commissioner (A) is absolutely correct. Therefore, the Id. Commissioner (A) held that the cenvat credit on the respondent cannot be denied on dutiable final product. He further observed that the respondent can avail cenvat credit on inputs contained in dutiable final product i.e. fatty acid. The said observation of the Ld. Commissioner (A) is absolutely correct and we do not find any infirmity with the same. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of Cenvat Credit Rules regarding maintaining separate accounts for inputs used in manufacturing dutiable and exempted goods.
2. Applicability of Rule 6(3)(b) of the Cenvat Credit Rules, 2004.
3. Denial of cenvat credit on inputs contained in exempted final finished goods.

Analysis:
1. The case involved a dispute regarding the availing of cenvat credit on inputs used for manufacturing both dutiable and exempted goods without maintaining separate records, as required under Rule 6 of the Cenvat Credit Rules. The respondent had availed credit on common inputs for products like Vanaspati and fatty acids. The Revenue contended that since the respondent did not maintain separate records for cenvatable inputs used in manufacturing dutiable and exempted goods, they were required to pay 10% of the total price at the time of clearance of exempted goods as per Rule 6(3)(b) of the Cenvat Credit Rules.

2. The Tribunal observed that the respondent was not manufacturing exempted goods until March 1, 2005, when Vanaspati became exempt from duty. From that date onwards, the respondent was obligated to maintain separate accounts for inputs used in manufacturing dutiable and exempted products. The Ld. Commissioner (A) correctly held that cenvat credit on inputs contained in exempted finished goods as of March 1, 2005, was not available to the respondent. However, the Commissioner allowed the respondent to avail cenvat credit on inputs contained in dutiable final products like fatty acids. The Tribunal concurred with this finding and concluded that the denial of cenvat credit on dutiable final products was unwarranted.

3. Ultimately, the Tribunal found no grounds for proceeding against the respondent and upheld the impugned order. The appeal by the Revenue was dismissed, and the cross objection was disposed of accordingly. The judgment highlighted the importance of maintaining separate records for inputs used in manufacturing dutiable and exempted goods to comply with the Cenvat Credit Rules and avoid disputes over availing cenvat credit.