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TMI Blog2018 (1) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise duty was granted, vide Notification No.6/2002-CE dated 01.03.2002, as amended by Notification 23/2004 CE dated 09.07.2004.The total credit involved in the inputs, lying in stock, as such or contained in the finished goods/semi-finished goods, as on 08.07.2004, worked out to Rs. 2,06,98,063/-, is not allowable in terms of rule 6(1) of the CCR, 2002, as such inputs have been used or intended to be used in the manufacture of exempted final products. 4. Rule 6(1) of CCR, 2002, as it stood, at the time, read, Cenvat credit shall not be allowed, on such quantity of input, which is used in the manufacture of exempted goods, except in the circumstances mentioned, in sub-rule (2) . As per rule 6 of the CCR, the benefit of availment of Cenvat credit of the duty paid on inputs, could be availed only, if the final product manufactured suffers duty. As the finished goods, viz. Computer and inputs in stock, intended to be used in manufacture of Computer were to be cleared without payment of duty, after they became exempt with effect from 09.07.2004, the total credit involved on the inputs worked out to Rs. 2,06,98,063/-, is payable by Wipro. As it appeared that the credit taken b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herwise required by law, for extinguishment of such right, and abridgment of the vested, right is recognised by law with effect from 01.03.2007 incorporating sub-rule 3(2) to Rule 11 of CENVAT Credit Rules, 2004, is not legal and proper approach as per CENVAT Credit Scheme. 9. According to him, the basic object of CENVAT Credit Scheme, is to avoid, cascading effect of duties, on the price of the final product. It is in that view only, the duty paid on the inputs is given back to the manufacturer as credit, if the final product, is cleared on payment of duty. Otherwise, inputs used in the final product are taxed, as inputs, as well as part of the value component of the final product when the final product is taxed, which leads to taxing of the same value component, a number of times, till a final product for ultimate consumption is manufactured, which leads to the cascading effect, making the cost of the products, very high for the consumers. However, if the final product is exempt, since there will not be any duty on the final product, the question of cascading effect of taxes does not arise. Even then, if the credit of the duty paid, on inputs is allowed, then it would amount to, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption for the next year, he will have to expunge the credit relating to the inputs lying in the stock or contained in the semi-finished/finished goods, at the time of re-opting for SSI exemption. 12. Mr.A.P.Srinivas, learned counsel for the appellant contended that this is the essence and mainstay of the CENVAT credit scheme. He therefore, submitted that when the final product, becomes exempt from duties, the manufacturer's entitlement to avail the CENVAT credit, ceases. 13. Learned counsel for the appellant submited that As per Rule 6(1) of CENVAT Credit Rules, 2004 "CENVAT credit shall not be allowed on such quantity of inputs, used in the manufacture of exempted goods", and this implies that, even though the manufacturer is eligible to avail credit on inputs immediately on receipt, the eligibility extinguishes, when the inputs contained in the goods are cleared without payment of duty. 14. According to the learned counsel for the appellant that Rule 11(3) of the CENVAT Credit Rules, 2004, introduced with effect from 01.03.2007, makes reversal of credit of the duty pertaining to inputs lying stock and inputs contained in the exempted finished good, as mandatory, and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of wholly exempted goods, credit taken, in respect of such inputs, is recoverable". 19. Learned counsel for the appellant submitted that CESTAT, Madras, has come to the conclusion that CENVAT credit is an indefeasible right to the manufacturer, in terms of para 17 of the Hon'ble Apex Court's decision, in the case of CCE, Pune Vs Dai Ichi Karkaria Ltd reported in 1999 (112) ELT 353 (SC) where in the issue decided by the Hon'ble Apex Court was with regard to the cost of the raw material, which required to be taken into account in determining the assessable value of an intermediate product. According to him, the question considered was, whether the cost of the raw material, the price paid by the manufacturer to its seller, as contended by the revenue, or it the price of the raw material, less the excise duty thereon, paid by the seller and for which, the manufacturer is entitled to credit, under the Modvat scheme, to be utilised against payment of excise duty on the products manufactured by him, Include the intermediate product, as contended by the manufacturer"? 20. According to the learned counsel for the appellant, the observation in that context, that "indefeasible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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