2019 (5) TMI 807 - AT - Central Excise

CENVAT credit - common inputs used in relation to manufacture of dutiable as well as exempted goods - reversal of proportionate credit/payment of 6 % of value of exempted goods - Rule 6 (3D) of Credit Rules - HELD THAT - The issue is settled in favour of the appellant in case of M/S. SPENTEX INDUSTRIES LTD. VERSUS CCE ST, INDORE 2016 (9) TMI 282 - CESTAT NEW DELHI wherein it is held that conjoint reading of the condition stipulated in the said Notification and Rule 6(3D) of the Credit Rules, make it clear that payment of 6 % of value of exempted goods under Rule, 6 (3)(i) of the Rule ibid, would be sufficient enough for availing exemption under the said Notification. CBEC in its Circular No. 845/03/2017 CX dated 01/02/2007 and 858/10/07- CX dated 8.11.2007 relied upon by Commissioner(Appeal), is not applicable on account of the fact that the Rule, 6(3D) of the credit Rule was inserted with effect from 01/04/2007 vide Notification No 3/11-CE(NT) dated 01/03/11. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand and penalty confirmation by Adjudicating Authority for excisable goods clearance under Central Excise Tariff Act, 1985. Interpretation of Cenvat Credit Rules, 2004 regarding reversal of credit for exempted final products. Legal sustainability of impugned order and penalty imposition.

Analysis:
The appellant, engaged in manufacturing excisable goods, challenged the demand and penalty confirmed by the Adjudicating Authority for the period from November 2015 to June 2017. The appellant cleared final products by paying excise duty and availing benefits under Notification No. 30/2004-CE, which excluded Cenvat Credit for exempted goods under Credit Rules. The Department issued a Show Cause Notice due to dissatisfaction with the appellant's practice of reversing credit for exempted products. The impugned order confirmed the demand and penalty, with the penalty imposed under Section 11 AC of the Central Excise Act, 1944. However, no findings were provided on the penalty imposition.

The appellant argued that Rule 6(3D) of Credit Rules, effective from 01/04/11, deems the payment under Rule 6(3) as Cenvat Credit not taken for exemption purposes, satisfying the conditions of the Notification. The appellant relied on a previous judgment to support their claim, emphasizing that the payment under Rule 6(3) is sufficient for availing exemption under the Notification. The Department, represented by Ld. DR, supported the impugned order.

The Tribunal referred to the judgment in Spentex Industries Limited vs CCE & ST, which clarified that payment under Rule 6(3) suffices for exemption under the Notification. The Tribunal highlighted the deeming provision of Rule 6(3D), stating that the payment should be considered as credit not taken for exemption purposes. Additionally, the Tribunal cited a case involving Feminine & Infant Healthcare Private Limited, where credit reversal was deemed as credit not availed ab initio for interpreting a different Notification. The Tribunal found that Circulars relied upon by the Commissioner(Appeal) were not applicable due to the insertion of Rule 6(3D) with effect from 01/04/2007.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and providing consequential benefits if any. The judgment emphasized the legal sustainability of the appellant's argument regarding the reversal of credit for exempted goods under the Cenvat Credit Rules, ultimately ruling in favor of the appellant.