2017 (3) TMI 371 - AT - Central Excise

CENVAT credit - Rule 6(3) of the CCR, 2004 - import of e-bikes in CKD condition - whether the credit lying in CENVAT account shall lapse, being unutilised? - Held that - appellant is importing e-bikes in CKD condition and clearing the same alongwith indigenously procured battery and paying duty thereon. Therefore, the e-bikes has became exempt from duty w.e.f. 29.04.2008. It is also admitted fact that as appellant was not maintaining separate account of inputs, therefore, the appellant start paying 10% of the value of e-bikes as per Rule 6(3) of the Cenvat Credit Rules, 2004 on their clearances. In that circumstances, Revenue cannot allege that the cenvat credit lying in their cenvat account on 29.04.2008 shall lapse as appellant is clearing e-bikes and parts prior to 29.04.2008 on payment of duty - provisions of Rule 11(3) of the CCR are not applicable. Appellant was not maintaining separate account for inputs used in manufacturing of e-bikes and parts thereof, therefore, provisions of Rule 6(3) are squarely applicable to the appellant as the appellant is manufacturing both dutiable and exempted final product and appellant is liable to pay 10% of the value of e-bikes at the time of their clearance and the cenvat credit lying in their cenvat account shall not lapse wholly but the cenvat credit lying in their cenvat account attributable to inputs, work in progress and finished e-bikes shall lapse. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Applicability of Rule 6(3) of the Cenvat Credit Rules.
2. Lapsing of Cenvat Credit on 29.04.2008 when e-bikes became exempted from duty.

Analysis:
Issue 1: The appellant imported e-bikes in CKD condition and cleared them along with indigenously procured battery, paying duty. The e-bikes became exempt from duty on 29.04.2008. As the appellant did not maintain separate accounts, they paid 10% of the value of e-bikes at clearance under Rule 6(3) of the Cenvat Credit Rules. The Revenue alleged that the cenvat credit would lapse on 29.04.2008. However, the Tribunal observed that the appellant was clearing e-bikes and parts before 29.04.2008, thus the credit would not lapse. The Commissioner (Appeals) also noted that the appellant was manufacturing e-bike parts and that the credit accumulated over time was correctly discharged as per Rule 6(3). The Tribunal upheld that Rule 6(3) applied to the appellant, and Rule 11(3) did not.

Issue 2: The Revenue argued that since the appellant was registered to manufacture only e-bikes, the credit would lapse. However, the Tribunal found that the appellant was also manufacturing e-bike parts, as evidenced by their registration application and monthly returns. The Tribunal held that the credit attributable to inputs, work in progress, and finished e-bikes would lapse, but not wholly. The Tribunal allowed the appeal, stating that Rule 11(3) did not apply to the case.

In conclusion, the Tribunal allowed the appellant's appeal, holding that Rule 6(3) applied to the appellant, and Rule 11(3) did not, based on the facts and circumstances of the case.