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Issues: (i) Whether cenvat credit taken on NCCD shown as paid through supplementary invoices, without actual debit in PLA or credit account, was admissible. (ii) Whether Rule 6 of the Cenvat Credit Rules, 2004 barred cenvat credit on POY used to manufacture PTY when PTY was liable to basic excise duty but exempt only from NCCD.
Issue (i): Whether cenvat credit taken on NCCD shown as paid through supplementary invoices, without actual debit in PLA or credit account, was admissible.
Analysis: The credit was taken on the basis of supplementary invoices issued for alleged payment of NCCD on captively consumed POY, but no corresponding duty payment was made by cash or by debit in PLA or permissible credit. The credit availed was found to be unsupported by actual duty payment and was utilised to discharge NCCD on captive clearances. The earlier holding that NCCD was not payable on captive consumption did not validate credit already taken on invoices backed by no real payment. The burden of establishing admissibility of credit lay on the manufacturer, and the record showed suppression and misdeclaration in the manner of availing the credit.
Conclusion: The credit demand of Rs. 1,18,21,343/- was upheld against the assessee, along with interest and penalty.
Issue (ii): Whether Rule 6 of the Cenvat Credit Rules, 2004 barred cenvat credit on POY used to manufacture PTY when PTY was liable to basic excise duty but exempt only from NCCD.
Analysis: PTY was not wholly exempted goods because basic excise duty remained payable; it was exempt only from NCCD. Rule 6 applies where an assessee manufactures both dutiable and exempted goods, and a product liable to basic excise duty cannot be treated as exempted merely because one levy is exempt. The ground on which the demand was raised, namely that PTY was exempted goods attracting Rule 6, was therefore not sustainable.
Conclusion: The credit demand of Rs. 1,28,04,499/- was set aside in favour of the assessee.
Final Conclusion: The appeal succeeded only in part: the demand relating to allegedly exempt PTY under Rule 6 was quashed, while the demand based on inadmissible credit taken through supplementary invoices was sustained together with interest and penalty.
Ratio Decidendi: Cenvat credit is inadmissible when taken on documents not backed by actual duty payment, and Rule 6 cannot be invoked against goods that remain dutiable to basic excise duty merely because they are exempt from one component of duty.
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