2017 (4) TMI 380 - AT - Central Excise

CENVAT credit - credit availed inputs used in manufacture of dutiable as well as exempt goods - The department has made out case that for credit of input has been availed and the same has been used for the manufacture of dutiable as well as exempted goods, respondent is required to pay an amount equal to 8-10% total price of the exempted goods as provided u/r 6(3) of CCR, 2004 - Held that - the respondent had availed the credit on the inputs at the time of receipt but at the time of clearance of the final product under exemption, the said credit was reversed. In this situation, it is the case as if the cenvat credit was not availed by the respondent - Provision of Rule 6(3)(b) is applicable only in case when the appellant availed the cenvat credit. However in the facts of the present case Rule 6(3)(b) has no application - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Availment of cenvat credit on inputs used for manufacturing both exempted and dutiable goods.
2. Application of Rule 6(3) of Cenvat Credit Rules, 2004 regarding payment of amount on exempted goods.
3. Interpretation of the requirement to maintain separate accounts for exempted and dutiable goods.

Analysis:
1. The case involved the appellant engaged in manufacturing exempted tractors and dutiable motor vehicle parts, including Hydraulic Vary Touch Unit (HVTU). The dispute arose from the appellant availing credit on inputs used for both exempted and dutiable goods. The department contended that the appellant had availed credit on inputs used for manufacturing both types of goods, leading to a demand for payment under Rule 6(3) of Cenvat Credit Rules, 2004.

2. The main issue revolved around the application of Rule 6(3) which requires either maintaining separate accounts for inputs used in exempted goods or paying a specified amount on exempted goods' price. The Commissioner (Appeals) allowed the appeal, stating that since the appellant reversed the cenvat credit at the time of clearance of exempted goods, it was as if the credit was not availed, thus exempting them from the rule. The revenue challenged this decision, citing judgments like CCE vs. Ballarpur Industries Ltd. and CCE vs. Nicholas Piramal (I) Ltd. to support their argument for payment under Rule 6(3).

3. The Tribunal analyzed the situation and found that the appellant did reverse the credit at the time of clearance of exempted goods, effectively nullifying the availed credit. Referring to a previous order in the appellant's case, the Tribunal held that once the credit on inputs is reversed, there is no obligation to pay under Rule 6(3). The Tribunal upheld the Commissioner (Appeals) decision based on this interpretation and the Supreme Court judgment in the case of Chandrapur Magnet. Consequently, the Tribunal dismissed the revenue's appeal, reinforcing the principle that reversal of credit at clearance negates the need for payment under Rule 6(3).

In conclusion, the judgment clarified the application of Rule 6(3) in cases where credit on inputs is reversed at the time of clearance of exempted goods, ultimately leading to the dismissal of the revenue's appeal and upholding the decision in favor of the appellant.