2018 (2) TMI 1398 - AT - Central Excise

CENVAT credit - bags and barrels arising in the course of manufacture, not usable - applicability of Rule 6(1) of Cenvat Credit Rules 2004 - Revenue is of the view that on the said bags and barrels, the appellant is required to pay an amount equal to 6% of the value of said goods in terms of explanation to Rule 6(1) of Cenvat Credit Rules 2004 - Held that - The provision of Rule 6 are applicable where the assessee is manufacturing dutiable as well as exempted goods - The appellant is not manufacturing these bags or barrels, therefore, Rule 6(1) or explanation thereto is not applicable to the facts of this case - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand confirmation under Explanation 1 to Rule 6(1) of Cenvat Credit Rules, 2004 along with penalty.

Analysis:
The appellant, a manufacturer of poly films, sold bags and barrels after using them for raw materials, which the Revenue claimed required payment under Rule 6(1) of Cenvat Credit Rules. The appellant argued that Rule 6(1) did not apply as the bags and barrels did not result from their manufacturing activity. Citing a Supreme Court decision, the appellant contended that the rule was inapplicable. The Revenue disagreed, asserting the rule's applicability post an amendment.

The tribunal examined Rule 6(1) and its explanation, which pertain to credits disallowed for goods used in manufacturing exempted products. It noted that the rule applies where the assessee manufactures both dutiable and exempted goods, which was not the case here. Referring to the Supreme Court's decision in a similar context, the tribunal concluded that waste not arising directly from manufacturing activity is not subject to Rule 6(1). As the bags and barrels were not a direct result of the manufacturing process, the tribunal held that Rule 6(1) did not apply in this scenario, setting aside the impugned order and allowing the appeal.