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2019 (4) TMI 1335 - AT - Central ExciseCENVAT Credit - common inputs used in dutiable as well as exempt goods - non-maintenance of separate records - Rule 6(3)(b) of CCR, 2004 - HELD THAT - In the present case, the process of dehydration of Coal Tar does not result in emergence of any new or different article having a distinctive name, character or use. After carrying out the process of dehydration, the goods remain the same viz. Coal Tar. The technical characteristic and use of the goods also remain the same. The process of dehydration simply results in removal of the moisture content from the Coal Tar. In technical and commercial parlance, the Coal Tar and dehydrated Coal Tar are treated as the same commodity. The provisions of erstwhile Rule 57CC and (d) equally applicable in respect of Cenvat Credit Rules, 2004 till the explanation was inserted in the said Rule vide Notification No. 6/2015-CE(NT) - It is also well settled that the provisions of Rule 6 of Cenvat Credit Rules are not applicable to the non-excisable goods till the explanation was inserted. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Contravention of Rule 6(2) of Cenvat Credit Rules, 2004. 2. Applicability of Rule 6(3)(b) of Cenvat Credit Rules, 2004. 3. Use of common inputs for dutiable and exempted products. 4. Interpretation of statutory provisions and bona fide conduct. 5. Relevance of previous case laws and circulars. 6. Time-barred demand and suppression of facts. 7. Definition and treatment of waste, refuse, or by-products. 8. Applicability of Rule 6 to non-excisable goods. Detailed Analysis: 1. Contravention of Rule 6(2) of Cenvat Credit Rules, 2004: The respondent was accused of contravening Rule 6(2) of the Cenvat Credit Rules, 2004, by failing to maintain separate accounts for common inputs used in the manufacture of both dutiable and exempted products. Specifically, the respondent did not maintain separate accounts for furnace oil used as fuel. 2. Applicability of Rule 6(3)(b) of Cenvat Credit Rules, 2004: Due to the failure to maintain separate accounts, the respondent was required to reverse an amount equal to 10% of the value of the exempted product (DCT) as per Rule 6(3)(b) of the Cenvat Credit Rules, 2004. The Revenue argued that the lower adjudicating authority's order was correct and that the Commissioner (Appeals) erred in setting it aside. 3. Use of Common Inputs for Dutiable and Exempted Products: The Revenue contended that the respondent used common inputs (furnace oil) for both dutiable and exempted goods without maintaining separate accounts. The respondent countered that the heat generated from burning furnace oil was used indirectly through flue gas/smoke, which does not necessitate separate accounts. 4. Interpretation of Statutory Provisions and Bona Fide Conduct: The Commissioner (Appeals) set aside the lower adjudicating authority's order, considering that the issue involved the interpretation of statutory provisions and that the respondent acted in a bona fide manner. The Commissioner relied on several case laws to support this view. 5. Relevance of Previous Case Laws and Circulars: The Revenue argued that the case laws cited by the Commissioner (Appeals) were irrelevant to the facts of the case. They emphasized that the benefits of erstwhile Rule 57(D) were not applicable since the inception of the new Cenvat Credit Rules, 2004. The respondent, however, cited various case laws and CBEC circulars supporting their position. 6. Time-Barred Demand and Suppression of Facts: The Revenue acknowledged that the audit team was aware of the facts, and thus, the impugned demand was time-barred due to no suppression of facts by the respondent. However, they argued that the demand for the normal period (one year back from the show cause notice) was sustainable. 7. Definition and Treatment of Waste, Refuse, or By-Products: The Revenue's contention that flue gas/smoke used in further processing should not be treated as waste was challenged by the respondent. They cited case laws where similar by-products were not considered excisable. The respondent argued that the process of dehydration did not result in a new product and thus should not be subject to Rule 6. 8. Applicability of Rule 6 to Non-Excisable Goods: The respondent argued that Rule 6 of the Cenvat Credit Rules, 2004, was not applicable to non-excisable goods, a position supported by CBEC's circulars and subsequent amendments. The Tribunal agreed, noting that the provisions of Rule 6 were not applicable to non-excisable goods until the explanation was inserted in 2015. Conclusion: The Tribunal concluded that the Revenue's appeal was not sustainable, and the Commissioner (Appeals)'s order was correct, legal, and proper. The appeal filed by the Revenue was dismissed. The Tribunal emphasized that the provisions of Rule 6 of the Cenvat Credit Rules were not applicable to non-excisable goods until the explanation was inserted in 2015. (Pronounced in Court on 31.12.2018)
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