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2016 (12) TMI 588 - AT - Central ExciseReversal of CENVAT credit - Wether the appellant Paam Eatables Ltd (PEL for short) a manufacturer of Maggi 2 minute Noodles etc on job work basis, and cleared on payment of duty, whether are liable to reverse input credit under Rule 57CC of Central Excise Rules, 1944 read with rule 6 (1) of the CENVAT Credit Rules, 2004, for removal of broken noodles (waste product) exempt under Notification No. 3/2005-CE? - Held that - the appellant is not required to reverse CENVAT credit on clearance of waste (floor sweeping and rejected Noodles). Further, held that the provisions of Rule 6 (3) of CCR, 2004, will not be attracted in the case of clearance of waste and by-product arising on the manufacturer of taxable final product. Under the facts & circumstances we also hold that the extended period of limitation is not attracted in this case. Accordingly, we allow the appeals with consequential benefits - reversal of credit not justified - appeal allowed - decided in favor of appellant-assessee.
Issues:
1. Liability to reverse input credit under Rule 57CC of Central Excise Rules, 1944 read with rule 6 (1) of the CENVAT Credit Rules, 2004 for removal of broken noodles exempt under Notification No. 3/2005-CE. Analysis: The appeal involved a dispute regarding whether the appellant, a manufacturer of noodles on a job work basis, was liable to reverse input credit for the removal of broken noodles exempt under a specific notification. The appellant had taken CENVAT credit for duty paid on inputs used in manufacturing noodles. The issue arose when broken noodles, considered waste product, were found exempt from excise duty. The revenue contended that the appellant should pay a specified percentage of the price of exempted goods under relevant rules. The Commissioner upheld the demand, imposing penalties, which led to the appeal before the Tribunal. The Tribunal analyzed the provisions of Rule 57CC of the Central Excise Rules, 1944, and Rule 6 of the CENVAT Credit Rules, 2004. The appellant argued that the broken noodles were waste products exempt from duty, thus not requiring a reversal of credit. They cited relevant case law and interpretations to support their position. The Tribunal considered the legislative intent behind the rules and the distinction between exempt final products and by-products. The Tribunal emphasized the literal interpretation of the rules and concluded that as long as common inputs were used in manufacturing both dutiable and exempted final products, the provisions of Rule 57CC would apply. The Tribunal referred to a previous ruling by a Larger Bench, which clarified the treatment of waste, scrap, and by-products not excisable at all. It highlighted the importance of maintaining separate accounts for inputs used in manufacturing exempted final products. The Tribunal observed that the appellant was not required to reverse CENVAT credit on the clearance of waste products. Citing a Supreme Court ruling, the Tribunal held that the provisions of Rule 6 (3) of the CENVAT Credit Rules, 2004, were not applicable in cases of waste and by-products arising from the manufacture of taxable final products. Consequently, the Tribunal allowed the appeals, setting aside the impugned orders and granting consequential benefits to the appellants.
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