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TMI Blog2004 (6) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts; that they had crossed the limit of 3500 M.T. on 30-6-2000 and up to 30-6-2000, they availed the Cenvat credit of the duty amounting to Rs. 21,18,351 paid on LDO and FO; that out of the said Credit, they utilised Rs. 80,300/- towards payment of duty in June, 2000 and the remaining amount was utilized towards payment of duty in July, 2000; that they had deposited the said amount by T.R. 6, Challan dated 10-11-2001 under protest; that two show cause notices dated 4-7-2002 for denying the Credit for the period 1-4-2000 to 30-6-2000 and dated 10-4-2002 for denying credit for the period 1-4-2001 to 2-7-2001 had been issued to them; that the Commissioner, under the impugned Order, confirmed the demands and imposed the penalties besides charging the interest on the ground that the Credit was not admissible to them during the period the final product manufactured by them was exempted wholly from the payment of duty. 3. The learned Advocate submitted that sub-rule (1) of Rule 57AD of the Central Excise Rules, provides that Cenvat Credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except for the circumstances mentioned in sub-r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the same is beyond the period of one year as provided under Section 11A of the Central Excise Act; that they had filed the Classification Declaration and had also filed monthly R.T. 12 Returns; that thus the Appellants had disclosed all material information and there was no suppression on their part; that they had always mentioned that they would be taking credit on fuel which was used in the manufacture of exempted products and as such neither there was any suppression nor mis-statement of facts; that the Superintendent of Central Excise had asked for comments from them under letter dated 17-10-2000 and the Appellants in their reply dated 20-10-2000 had categorically submitted that they would take the Cenvat credit on fuel used in the manufacture of exempted product. He, finally, mentioned that no penalty is imposable on them as the issue involved is purely a legal issue involving interpretation of Rule 57AD; that as the entire amount has been deposited by them before the issue of show cause notice no penalty is imposable on the Appellants. He has placed reliance on decision in the case of Rashtriya Ispat Nigam Ltd. v. C.C.E., 2003 (161) E.L.T. 285 (T) wherein the Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also avail of Cenvat credit of duty paid on LDO and FO used as fuel in the manufacture of their final products. Rule 57AB(1) of the Central Excise Rules, 1944 empowers a manufacturer of final product to take Cenvat credit of the duty paid on inputs. Rule 57AC contains conditions for allowing Cenvat credit. Rule 57AD contains provisions relating to Obligation of manufacturer of dutiable and exempted goods . Sub-rule (1) provides that Cenvat credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in the circumstances mentioned in sub-rule (2) . Thus, the Credit cannot be taken in respect of any inputs which is used in the manufacture of exempted goods. Sub-rule (2) contains exception to the provisions of sub-rule (1). Sub-rule (2) of Rule 57AD reads as under : (2) Where a manufacturer avails of Cenvat credit in respect of any inputs, except inputs intended to be used as fuel, and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te accounts or pay an amount equal to 8% of the price of the exempted goods or pay an amount equivalent to the Cenvat credit. The Appellants admittedly avail of full exemption from payment of duty up to 3500 M.T. of their products. It is not the case of the Appellants that they are also manufacturing any other dutiable final product during the period they avail of benefit of Notification No. 6/2000 or 3/2001. Thus in a financial year they avail exemption from payment of entire duty of excise on their products up to 3500 M.T. They, as such, during the period of availment of exemption, cannot claim that the impugned inputs are used in the manufacture of both dutiable goods and exempted goods. When they exhaust their exemption limit specified in Notification No. 6/2000 (or 3/2001), they start clearing the goods on payment of appropriate duty. During this period of a financial year, they do not clear any duty paid goods. Thus the Appellants do not fall within the circumstances mentioned in sub-rule (2) . In Rochi Ram Sons case, the Appellants were manufacturing Wrist Watches of MRP below Rs. 500/- per piece which were wholly exempt from payment of duty and the watches of MRP above R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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