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TMI Blog2014 (10) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... Menthol Crystals falling under sub-heading 30039021 became fully exempt from duty under Notification No. 4/08-CE dated 01/03/08, the other final products namely DMO and essential oils derived from DMO remained dutiable. In terms of the provisions of Rule 6 (1) of Cenvat Credit Rules, 2004, Cenvat credit shall not be allowed on such quantity of inputs, which has been used in or in or in relation to manufacture of the exempted goods except in the circumstances mentioned in sub-Rule (2). In terms of sub-Rule (2) of Rule 6 ibid when a manufacturer has used Cenvat credit availed inputs or input services in or in relation to manufacture of dutiable final products as well as exempted final products, he either has to maintain separate account and inventory of the inputs used in or in relation to manufacture of dutiable final product and exempted final product and confine the Cenvat credit availment only to that quantity of inputs/input services which have been used in or in relation to manufacture of dutiable final products, and if he does not maintain any account and inventory, he is required to pay an amount at the time of clearance of the exempted final product, as per the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r export. 1.3 It was also found that one consignment of Menthol had been cleared under invoice No. 106 dated 29/02/08 for export under claim for rebate of duty and the duty involved on this consignment which had been paid through Cenvat credit was Rs. 7,68,608/-. This consignment was shown as sales return and the duty debited at the time of clearance was re-credited in RG-23A Pt. I register on 07/03/08. Department was of the view that since the Menthol cleared earlier on 29/02/08 had become fully exempt from duty w.e.f. 01/03/08, on the date of its return to the factory the appellant would not be eligible to avail the credit of the duty earlier paid in terms of Rule 16 of the Cenvat Credit Rules and as such, it appeared that Cenvat credit of Rs. 7,68,608/- would also not be admissible to the appellant. 1.4 It is in view of the above facts that a show cause notice dated 27/03/09 was issued to the appellant for - (a) recovery of Cenvat credit amounting to Rs. 1,07,94,175/- under Rule 6 and Rule 11 of the Cenvat Credit Rules, 2004 readwith Section 11A (1) of Central Excise Act, 1944 alongwith interest thereon under Section 11AB of the Central Excise Act, 1944 ; and (b) imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom DMO have remained dutiable, that the provisions of Rule 6 (1) are not applicable to this case, as at the time of receipt of the inputs, all the final products were dutiable, that the provisions of sub-Rule (2) of Rule 6 of the Cenvat Credit Rules can be applied only w.e.f. 01/03/08 when out of various products, two products - Menthol Flake and Menthol Crystals became fully exempt from duty and other final products remained dutiable, but upto 29/02/08, all the goods manufactured by the appellant were chargeable to duty and as such the provision of Rule 6 were not applicable during the period prior to 01/03/08, that since neither Rule 6 (1) nor Rule 6 (2) readwith Rule 6 (3) was applicable upto 29/02/08, the Cenvat credit in respect of the stock of inputs as on 01/03/08 or the quantity of the inputs in process or the quantity of inputs contained in the exempted final product in stock as on 01/03/08, cannot be demanded by invoking Rule 6, that since neither Rule 6 nor Rule 11 is applicable, the impugned order confirming the Cenvat credit demand of Rs. 95,51,299/- is not sustainable, that as regards the demand of Rs. 7,68,608/- in respect of the Menthol earlier cleared on 29/02/08, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances mentioned in Sub-Rule (2). According to the sub-Rule (2) of Rule 6, when a manufacturer or provider of output service avails of Cenvat credit in respect of any inputs or input services for manufacture of dutiable as well as exempted final products, he has either to maintain separate account and inventory of inputs/input services meant for dutiable and exempted final product and confine the Cenvat credit availment only in respect of that quantity of inputs and/or input services, which have been used in or in relation to manufacture of dutiable final product and if does not maintain, such account and inventory and does not follow the above practice, he is required to pay an amount at the time of clearance of the exempted final product as per the provisions of sub-Rule (3). The amount payable in terms of sub-Rule (3) is either the notional amount @ 5%/10% of the sale value of the exempted final product or is the Cenvat credit attributable to the inputs used in the manufacture of the exempted final product to be determined as per the provisions of this sub-Rule. From a reading of sub-Rule (1), (2) and (3) of Rule 6 of Cenvat Credit Rules, 2002 it is clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or if there are more than one final products being made out of one or more cenvated inputs, all the final products have become exempt from duty at the same time. This Rule would not be applicable if more than one final products are being manufactured out of one or more final product and out of them only some have become fully exempt but other final products have remained dutiable. In our view, in such a situation, it would be incorrect to apply this sub-Rule and prohibit the utilization of the Cenvat credit available as on the date of the exemption for payment of the duty on the dutiable final products, as in terms of Rule 3 (4) of the Cenvat Credit Rules, 2004, the Cenvat credit can be utilized for payment of any duty of excise on any final product. Needless to say, various Rules of the Cenvat Credit Rules, 2004, have to be read harmoniously and, therefore, Rule 11 (3) cannot be given an interpretation which is in-conflict with the provisions of Rule 3 (4). However, the Rule 11 (3) would be subject to the provisions of Rule 6 and in this regard we do not accept the appellants plea that the provisions of Rule 6 (1) are not applicable. From a perusal of Rule 11 (3) as well as 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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