2016 (12) TMI 215 - AT - Central Excise

CENVAT credit - liability to pay amount of 10% of the value of exempted goods - goods cleared following chapter X - common input and input services in the manufacture of exempted goods as well as dutiable goods without maintaining separate accounts as envisaged under Rule 6(2) of CENVAT Credit Rules, 2004 - Sulphuric Acid classifiable under Central Excise Tariff Heading 2807 00 10 of the First Schedule to the Central Excise Tariff Act, 1985 - Held that - the appellant cleared the goods without payment of duty not because the goods were per se exempted goods. Sulphuric acid is leviable to excise duty. Only on following the procedure under chapter X does the appellant be eligible to clear the goods without payment of duty. Thus the exemption from payment of duty is based upon fulfillment of conditions by the appellant or the buyer. Therefore at the time of manufacture the appellant cannot ascertain with full confidence that the end product is exempted from duty. The exemption being contingent upon conditions, it cannot be said to warrant a situation to maintain separate accounts. The demand raised alleging that pre-fabricated construction and stationary pre-cooling equipments cleared without payment of duty on the strength of C.T-2 certificate are exempted goods is not sustainable - demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Interpretation of Rule 6(2) of CENVAT Credit Rules, 2004 in cases where goods are cleared under chapter X procedure without payment of duty.

Analysis:

1. Facts and Background:
The appellant manufactured various excisable goods, including Sulphuric Acid, which was dutiable. The appellant cleared Sulphuric Acid both on payment of duty and duty-free under the prescribed procedure. The department issued show cause notices alleging non-compliance with Rule 6(2) of CENVAT Credit Rules, 2004, leading to demands for payment based on the value of exempted goods.

2. Appellant's Argument:
The appellant contended that Sulphuric Acid cleared without duty payment under chapter X procedure should not be considered exempted goods, thus Rule 6(2) does not apply. The appellant cited several judgments supporting their position.

3. Department's Position:
The department argued that since goods were cleared without duty payment, the appellant must reverse credits or pay 10% of the value of such goods. They distinguished Rule 6(1) from the earlier provision 57CC and disagreed with the appellant's interpretation.

4. Judicial Analysis:
The tribunal analyzed previous judgments, including Aureola Chemicals Ltd and Hindustan Zinc Ltd cases. In Aureola Chemicals Ltd, it was held that goods cleared under chapter X procedure are neither exempted nor chargeable to nil duty. Similarly, Hindustan Zinc Ltd case emphasized the need for discernibility of duty liability at the time of input receipt.

5. Decision and Rationale:
The tribunal ruled in favor of the appellant, citing precedents where it was held that goods cleared under chapter X procedure are not exempted goods. The tribunal found the demand unsustainable and set aside the impugned orders, allowing the appeals with consequential reliefs.

6. Conclusion:
The tribunal's decision clarified the applicability of Rule 6(2) in cases of goods cleared under chapter X procedure without payment of duty. By aligning with established case law, the tribunal provided a clear interpretation and ruled in favor of the appellant, granting relief from the demands raised by the department.