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TMI Blog2014 (11) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... me exempt, others have remained dutiable. Since in terms of sub-rule (4) of Rule 3 of the Rules, the cenvat credit may be utilized for payment of any duty of excise on any final product, if out of the same cenvat credit availed inputs, more than one final product are manufactured and out of those final products, one final product has become fully exempt from duty, the cenvat credit can be utilized for payment of duty on the other final products, which are dutiable and as such, the manufacturer’s right to utilize the cenvat credit for payment of duty on the final products which are still dutiable cannot be taken away just because out of several final products, one final product has become exempt from duty. We, therefore, hold that the Revenue’s interpretation of Rule 11(3) is not correct. While the provisions of sub-rule (3)(ii) of Rule 11 of the Cenvat Credit Rules, 2004 are not applicable, the provisions of sub-rule (1) of Rule 6 of the Cenvat Credit Rules, 2004, would be applicable , if during the period of dispute, the appellant were clearing their finished products for home consumption. However, the provisions of either sub-rule (1) or of sub-rule (2) read with sub-rule (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in respect of the inputs/input services used in or in relation to the manufacture of dutiable final products or if he does not do so, he shall be required to pay an amount in respect of the clearances of exempted final products as per the provisions of Rule 6(3), which is either an amount equal to 5% /10% of the sale value of the exempted final products or an amount equal to the cenvat credit involved in respect of the inputs/input services used in or in relation to the manufacture of the exempted final product. Further, as per the provisions of Rule 11(3)(ii) of Cenvat Credit Rules, when a manufacturer is using cenvat credit of excise duty paid on the inputs used in or in relation to the manufacture of some final product and that final product has become exempted absolutely in terms of some exemption notification issued under Section 5 A of the Central Excise Act, 1944,he shall be required to pay an amount equivalent to the cenvat credit, if any, taken by him in respect of the inputs received by him for manufacture of the said final product which are lying in stock or are in process or are contained in the final products lying in stock on the date of exemption and after deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various essential oils derived from DMO, which were dutiable, but this plea was not accepted. 1.4 On appeal being filed to the Commissioner (Appeals) against this order, the Commissioner (Appeals) vide order-in-appeal dated 30.08.2010 upheld the cenvat credit demand along with interest but set aside the penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act, 1944 holding that penalty is not sustainable. 1.5 Against the above order of the Commissioner (Appeals), while the appellant have filed the appeal no.E/4032/2010-EX(DB) challenging the confirmation of the cenvat credit demand, Revenue has filed appeal against part of the Commissioner (Appeals)s order setting aside the order of penalty. 2. Heard both the sides. 3. Shri S.K. Mathur, Advocate, ld. Counsel for the appellant, pleaded that since the appellant out of the same cenvat credit availed input crude menthol, manufactured dutiable final products as well as exempted final products, the provisions of Rule 11(3) of the Cenvat Credit Rules, 2004 would not be applicable, as Rule 11(3) applies only in those cases where cenvat credit availed inputs have been used in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducts were no longer dutiable w.e.f. 1.3.2008, the provisions of Section 11(3) of the Rules would become applicable, that no evidence has been produced by the appellant in support of their plea that during the period of dispute, their finished products were being exported out of India and that in view of this, there is no infirmity in the impugned order upholding the cenvat credit demand. With regard to the Revenues appeal, she pleaded that since the confirmation of cenvat credit demand has been upheld, penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11 AC of the Central Excise Act would be attracted and there is absolutely no justification for setting aside this penalty, as the appellant had suppressed the relevant information from the department. 5. We have considered the submissions from both the sides and perused the records. 6. The appellant received the duty paid Crude Menthol and processed the same in their factory. Their main final products are Menthol flakes and Menthol Crystals. Besides this, a by-product DMO oil also emerges which is further processed to obtain Terpine, Menthone, Peppermint oil, etc. During the period prior to 1.3.2008, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported. 7.1 From a perusal of this sub-rule, it is clear that this sub-rule would be applicable if the some cenvat credit availed inputs are being used for manufacture of a final product and that final product has become fully exempt from duty. In such a situation, the assessee would be liable to pay an amount equal to the cenvat credit involved in respect of the inputs lying in stock or in process, or contained in the final products lying in stock on the date of exemption, and after deducting this amount from the cenvat credit balance, if any, as on the date of exemption, if any cenvat credit balance still remains, it shall lapse and the same shall not be allowed to be utilized for payment of duty on any goods whether cleared for home consumption or for export. In our view, this sub-rule would not apply when out of common cenvat credit availed inputs, more than one final products are manufactured and while some final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in this regard, they rely upon the judgements of Hon ble Bombay High Court in the case of Sharp Menthol India (supra) and Repro India (supra), judgement of the Hon ble Delhi High Court in the case of Punjub Stainless Steel (supra) and judgement of the Hon ble Himachal Pradesh High Court in the case of Drish Shoes (supra), wherein it has been held that the word excisable goods in sub-rule (6) of Rule 6 would include the excisable goods which are fully exempt from duty and accordingly, if the fully and unconditionally exempt excisable goods are exported out of India under bond/LUT, the provisions of sub-rule (1), (2)and (3) would not be applicable and the cenvat credit would not be liable to be reversed. In view of the above judgements of High Courts, we hold that when the final products, even if fully and unconditionally exempt from duty, have been exported out of India under bond/letter of undertaking, the provisions of Rule 6(1), 6(2) and 6(3) would not be applicable. But if the appellant were clearing their final products for home consumption, in accordance with the provisions of Rule 6(1), cenvat credit would not be admissible to the extent the cenvated inputs have been use ..... X X X X Extracts X X X X X X X X Extracts X X X X
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