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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 ..... 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). From a perusal of Rule 11 (3) as well as 11 (2) it is clear that these two sub-Rules of Rule 11 are also in accordance with the general principles of the Cenvat credit that no Cenvat credit would be admissible in respect of inputs or input services which have been used in or in relation to manufacture of the exempted final products. As observed by the Apex court in its judgment in the case of CCE, Vadodara vs. Gujarat Narmada Fertlisers Co. Ltd. (2009 (8) TMI 15 - SUPREME COURT) mentioned above, this principle is inbuilt in the very structure of the Cenvat credit scheme and Rule 6 (1) and Rule 6 (2) also merely reiterate and highlight this principle. Therefore, no Cenvat credit would be admissible in respect of any inputs which have been used in or in relation to manufacture of final product. While the provisions of Rule 11 (3) (ii) of the Cenvat Credit Rules, 2004 are not applicable, the availability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintain 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 provisions of sub-Rule (3) of this Rule, which is either 5%/10% of the sale value of the final product or is the Cenvat credit attributable to the inputs/input services used in the manufacture of the final product to be calculated as per the formula prescribed in this sub-Rule. In terms of sub-Rule (3) of Rule 11 of the Cenvat Credit Rules, 2004 introduced w.e.f. 01/03/07, a manufacturer of final product shall be required to pay an amount equivalent to the Cenvat credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product, which are lying in his stock or are in process or are contained in the said final product lying in stock, if - (i) he has opted for exemption from wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as such, it appeared that Cenvat credit of ₹ 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 ₹ 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 of penalty on the appellant under Section 11AC of Central Excise Act, 1944 readwith Rule 25 of the Central Excise Rules, 2002. 1.5 The above show cause notice was adjudicated by the Commissioner vide order-in-original No. 106/Commr/M-II/2010 dated 26/02/10 by which the above-mentioned Cenvat credit demand was confirmed against the appellant alongwith interest thereon under Section 11AB and beside this, penalty of equal amount was imposed on them under Rule 25 of the Central Excise Rules readwith Section 11AC of the Central Excise Act, 1944. 1.6 Against the above order of the Commissioner, this appeal has been filed. 2. Heard both the sides. 3. Shri S.K. Mathur, Advocate, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able 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 ₹ 95,51,299/- is not sustainable, that as regards the demand of ₹ 7,68,608/- in respect of the Menthol earlier cleared on 29/02/08, but subsequently returned on 07/03/08, the demand is without any basis, as at the time of clearance of the goods, the same were dutiable and the duty had been correctly paid and when the goods were returned, the Cenvat credit of the duty earlier paid would be admissible in terms of the provisions of Rule 16 of the Central Excise Rules, 2002 and in view of the above submissions, the impugned order is not sustainable. 4. Ms. Sweta Bector, learned DR, defended the impugned order by reiterating the findings of the Commissioner. 5. We have considered the submissions from both the sides and perused the records. 6. The undisputed facts are that the appellant were using duty pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctice, 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 basic principle behind these sub-Rules of Rule 6 is that Cenvat credit would not be available in respect of inputs or input services which have been used in or in relation to manufacture of exempted final products. Apex Court in the case of CCE, Vadodara vs. Gujarat Narmada Fertilisers Co. Ltd. reported in 2009 (240) E.L.T. 661 (S.C.) considered the question as to when duty paid fuel inputs have been used for generation of steam which, in turn, was used for generation of electricity, a portion which was used for manufacture of fertilizers, an exempted final product, whether proportionate Cenvat credit would be reversible in respect of the quantity of the electri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, 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 (2) it is clear that these two sub-Rules of Rule 11 are also in accordance with the general principles of the Cenvat credit that no Cenvat credit would be admissible in respect of inputs or input services which have been used in or in relation to manufacture of the exempted final products. As observed by the Apex court in its judgment in the case of CCE, Vadodara vs. Gujarat Narmada Fertlisers Co. Ltd. (supra) mentioned above, this principle is inbuilt in the very structure of the Cenvat credit scheme and Rule 6 (1) and Rule 6 (2) also merely reiterate and highlight this principle. Therefore, no Cenvat credit would be admissible in respect of any inputs w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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