2018 (9) TMI 9 - AT - Central Excise

Applicability of Rule 3 of CCR - Recovery of CENVAT Credit - Rule 16 of Central Excise Rules, 2002 - Held that - Rule 3 of Cenvat Credit Rules provides for baring the appellant from taking Cenvat credit of duty paid by availing the benefit of exemption under N/N. 01/2011-CE - However, the said rule is not applicable in the present case, because in the present case Cenvat credit is not availed by virtue of the provisions of said Rule 3 of Cenvat Credit Rules, 2004 but it is availed by virtue of Rule, 16 of Central Excise Rules, 2002 where there is a deeming provision that such goods shall be deemed to be inputs - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Admissibility of Cenvat credit under Rule 16 of Central Excise Rules, 2002.
2. Interpretation of Rule 3 of Cenvat Credit Rules, 2004 regarding exemption under Notification No.01/2011-CE.

Analysis:
1. The appeals arose from an Order-in-Appeal involving the demand of Cenvat credit for different periods. The appellants were manufacturing 'Chyawanprash' which produced 'Amla Pisthi', an agricultural product requiring storage in a cold storage facility. The Amla Pisthi was cleared to a cold storage outside the factory on payment of Central Excise duty, which was later returned to the manufacturing unit, and the duty paid was availed as Cenvat credit under Rule 16 of Central Excise Rules, 2002. The Revenue contended that the duty paid was not admissible under Rule (1)(i)(a) of Cenvat Credit Rules, 2004. The demands were confirmed, and penalties imposed, which were upheld by the Commissioner (Appeals), leading to the appeals before the Tribunal.

2. The Counsel for the appellant argued that the credit was availed under Rule 16 of Central Excise Rules, 2002, which deems goods brought back to the factory as inputs under Cenvat Credit Rules, 2004. They highlighted that if they had been permitted to store goods outside the factory under Rule 4 of Central Excise Rules, 2002, they would not have needed to pay Central Excise duty, and the issue of credit would not have arisen. The Counsel emphasized that there should be no discrimination if they chose Rule 16 over Rule 4. On the other hand, the Revenue supported the impugned orders.

3. After hearing both sides, the Tribunal found that Rule 3 of Cenvat Credit Rules, which bars the appellant from taking credit if availing exemption under Notification No.01/2011-CE, was not applicable in this case. The Tribunal noted that the Cenvat credit was not availed under Rule 3 but under Rule 16 of Central Excise Rules, 2002, which deems such goods as inputs. Consequently, the Tribunal did not agree with the Revenue's view and allowed both appeals filed by the appellants, setting aside the impugned orders. The appellants were entitled to consequential relief as per law.

This judgment clarifies the admissibility of Cenvat credit under specific rules and the interpretation of relevant provisions regarding exemptions, providing a detailed analysis of the issues involved and the Tribunal's decision.