2017 (4) TMI 277 - AT - Central Excise

CENVAT credit - manufacture of Homatropine Methyl Bromide (HMB) - denial on the ground that as goods manufactured by the appellant are exempt under N/N. 4/2006 dt. 01.03.2006, therefore, appellant is not required to pay duty, consequently, the appellant is not entitle to avail Cenvat Credit on inputs used in manufacture of final exempted goods - Held that - the appellant cannot be denied Cenvat Credit as final goods which are exempt has been cleared by the appellant on payment of duty. The said payment of duty shall amount to reversal of Cenvat Credit on inputs. Therefore, appellant is entitle for input which has been used in manufacturing of final goods cleared on N/N. 4/2006 ibid on payment of duty - credit allowed - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Entitlement to Cenvat Credit on inputs used in manufacturing of final exempted goods cleared under domestic tariff area on payment of duty.
2. Entitlement to avail Cenvat Credit on inputs used in manufacturing of export goods cleared under LUT/rebate after payment of duty.

Analysis:

Issue A - Entitlement to Cenvat Credit on inputs used in manufacturing of final exempted goods cleared under domestic tariff area on payment of duty:
The appellant exported consignments under LUT and cleared some consignments on payment of duty in DTA. The Revenue disallowed Cenvat Credit on the grounds of exemption of the final product under Notification No.4/2006. The appellant contended that they are entitled to use Cenvat Credit on inputs under Rule 6(6) of Cenvat Credit Rules, 2004. The Tribunal held that since the appellant cleared goods on payment of duty in DTA, the appellant cannot be denied Cenvat Credit as the duty payment amounts to reversal of Cenvat Credit on inputs. Citing relevant precedents, the Tribunal ruled in favor of the appellant, allowing them to avail Cenvat Credit on inputs used in manufacturing final exempted goods cleared on payment of duty.

Issue B - Entitlement to avail Cenvat Credit on inputs used in manufacturing of export goods cleared under LUT/rebate after payment of duty:
The appellant contended that they should be allowed Cenvat Credit on inputs used in manufacturing export goods cleared under LUT, even though the final product is exempted. Referring to Rule 6(6) of Cenvat Credit Rules, 2004 and relevant case laws, the Tribunal found in favor of the appellant. The Tribunal held that as the goods were exported under LUT, the appellant is entitled to avail Cenvat Credit on inputs used in manufacturing export goods. The Tribunal upheld the appellant's right to claim Cenvat Credit in this scenario.

In conclusion, the Tribunal set aside the impugned orders, allowing the appeals in favor of the appellant. The judgment highlighted the appellant's entitlement to Cenvat Credit on inputs used in manufacturing both final exempted goods cleared in DTA on payment of duty and export goods cleared under LUT after payment of duty. The decision was based on the interpretation of relevant rules and supported by legal precedents, ensuring the appellant's right to claim Cenvat Credit in the specified circumstances.