2010 (6) TMI 757 - HC - Central Excise

High Court affirms Tribunal decision on Cenvat Credit Rule 6, exempted goods liability

The High Court upheld the Tribunal's decision in favor of the assessee, ruling that the assessee was not liable to pay 8% of the price of exempted goods ... Reversal of CENVAT credit - non-maintenance of separate accounts of inputs - Rule 6(2) of Cenvat Credit Rules, 2002 - Whether the Tribunal was correct in ignoring the statutory provisions of Rule 6 of CCR 2002 and the Board's Clarification issued vide Circular No.654/45/2002-CX dated 19.8.2002 and holding that the assessee had reversed the credit at the time of removal of goods and they are not required to pay 8% of the price of the exempted goods? - Whether the Tribunal was correct in holding that the principle laid down by the Apex Court in the case of Chandrapur Magnets case [1995 (12) TMI 72 - SUPREME COURT OF INDIA] continues to apply despite the introduction of Cenvat Credit Rules. 2002? Held that: - it is manifest on the face of the order that the Tribunal has considered all the relevant material on record and has afforded reasonable opportunity and by placing reliance on the notification and also the judgment of the Apex Court in the case of Chandrapur Magnet Wires Pvt. Ltd., vs. CCE, Nagpur [1996 (81) ELT 3 (SC)] and applying the ratio of the said case to the facts in hand, has reversed the order passed by the assessing authority and held that assessee is not liable to pay 8% of the price of the exempted goods and consequently, allowed the appeal - there is no error in the Tribunal's order. The period of effect of amendment to Rule 6 of the CENVAT Credit Rules. 2002, the period is extended from 1st day of March, 2002 to the 9th day of September 2004 (both days inclusive). In the instant case, the date of removal of friction welding machines is on 1.1.2004 and the said date comes within the extended period of September 2004 as per the Finance Act. Therefore, on this ground also, the appeal filed by the appellants is liable to be dismissed. Appeal dismissed - decided against Revenue. Issues:1. Interpretation of Cenvat Credit Rules, 2002 and applicability of Chandrapur Magnets case.2. Liability of the assessee to pay 8% of the price of exempted goods.3. Jurisdictional authority's demand for payment due to lack of separate accounts of inputs.4. Tribunal's decision in favor of the assessee and the Revenue's appeal against it.5. Effect of the Finance Act, 2010 on the period of amendment to Rule 6 of Cenvat Credit Rules, 2002.Analysis:1. The appeal raised questions of law regarding the Tribunal's decision on the applicability of the Chandrapur Magnets case despite the introduction of Cenvat Credit Rules, 2002. The Tribunal held that the assessee was not required to pay 8% of the price of exempted goods, contrary to the Revenue's contention based on Rule 6 of the Cenvat Credit Rules, 2002 and circulars issued by the Board. The High Court found no error in the Tribunal's decision, citing the Tribunal's consideration of relevant material and reliance on legal precedents, leading to the dismissal of the Revenue's appeal.2. The case involved the liability of the assessee, a manufacturer of friction welding machines, to pay 8% of the total price of exempted goods due to the absence of separate accounts of inputs as required by Rule 6 of the Cenvat Credit Rules, 2002. The jurisdictional authority issued a notice demanding payment, which was confirmed by subsequent orders. However, the Tribunal overturned this decision, ruling in favor of the assessee. The High Court upheld the Tribunal's decision, emphasizing that the assessee was not liable to pay the 8% amount, as affirmed in the judgment.3. The jurisdictional authority's demand for payment stemmed from the assessee's failure to maintain separate accounts of inputs as per Rule 6 of the Cenvat Credit Rules, 2002. This non-compliance led to the issuance of a notice and subsequent orders confirming the demand for payment. However, the Tribunal's decision favored the assessee, leading to the appeal by the Revenue. The High Court supported the Tribunal's decision, finding no legal errors and dismissing the Revenue's appeal.4. The Tribunal's decision in favor of the assessee prompted the Revenue to file an appeal, contesting the Tribunal's ruling. The High Court upheld the Tribunal's decision, highlighting the Tribunal's consideration of relevant material, legal precedents, and the absence of errors in its judgment. The dismissal of the Revenue's appeal was based on the High Court's agreement with the Tribunal's reasoning and conclusion in favor of the assessee.5. The effect of the Finance Act, 2010 on the period of amendment to Rule 6 of the Cenvat Credit Rules, 2002 was also a significant aspect of the case. The extension of the period from March 1, 2002, to September 9, 2004, influenced the assessment of the case, particularly concerning the date of removal of the exempted goods. The High Court noted that the date of removal fell within the extended period, further supporting the dismissal of the Revenue's appeal.