Rule 6 reversal on exempt clearances remains payable despite later end-use certificates in notification-based supply disputes

Where exempt clearances were made under Notification No. 16/2001-C.E. subject to production of end-use certificates, later production of the certificates did not remove the Rule 6 obligation to debit 8% of the value of exempted goods when MODVAT/CENVAT credit had been taken on inputs. The limited exception in Rule 6(5)(v) for supplies covered by Notification No. 108/95-C.E. was held not extendable by analogy to supplies made to earthquake-affected areas. On that basis, the refund of the amount debited was not available and the reversal requirement under Rule 6 remained applicable.

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Issues: Whether the appellant was entitled to refund of the amount debited at 8% of the value of exempted clearances under Rule 6 of the Cenvat Credit Rules, 2004, when the duty demand based on non-production of end-use certificates had been dropped.

Analysis: The exemption under Notification No. 16/2001-C.E. was available subject to production of end-use certificate. The appellant did not produce the certificate at the relevant stage, and the demand was later dropped only because the certificates were produced before the adjudicating authority. The obligation under Rule 6 to debit 8% of the value of exempted goods remained applicable where MODVAT/CENVAT credit had been availed on inputs used in the manufacture of exempted goods. The limited exception in Rule 6(5)(v) for supplies covered by Notification No. 108/95-C.E. could not be extended by analogy to supplies made to earthquake-affected areas. A tribunal cannot create an exemption by equating such clearances with supplies to the United Nations or an international organization.

Conclusion: The appellant was not entitled to the refund, and the demand-related reversal requirement under Rule 6 was upheld.

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