2013 (3) TMI 117 - AT - Central Excise

Tribunal Grants Appeal, Upholds CENVAT Credit Rule 6(3)

NAV BHARAT IMPEX Versus COMMISSIONER OF CENTRAL EXCISE, DELHI

NAV BHARAT IMPEX Versus COMMISSIONER OF CENTRAL EXCISE, DELHI - 2012 (285) E.L.T. 582 (Tri. - Del.) Issues Involved:1. Whether the appellant is required to reverse the CENVAT Credit lying in balance as on 31-3-2008 due to the exemption of Menthol Crystals (BP/USP Grade) from payment of duty.2. Applicability of Rule 6(1) and Rule 6(3) of the CENVAT Credit Rules, 2004.3. Interpretation of the manufacturing process and the classification of products as final products or byproducts.4. Application of relevant case law and precedents.Issue-wise Detailed Analysis:1. Reversal of CENVAT Credit:The primary issue is whether the appellant must reverse the CENVAT Credit lying in balance as on 31-3-2008 because Menthol Crystals (BP/USP Grade) were exempted from duty. The appellant argued that they were following Rule 6(3) of the CENVAT Credit Rules, 2004, and were paying 10% of the value of the exempted final product at the time of clearance. The adjudicating authority, however, concluded that the entire raw materials were used for manufacturing the exempted final product, hence necessitating the reversal of the CENVAT Credit.2. Applicability of Rule 6(1) and Rule 6(3):The appellant contended that they adhered to Rule 6(3) by paying an amount equivalent to 8% or 10% of the value of the exempted product when removed from the factory. The Revenue argued that Rule 11(3) necessitates the reversal of credit for inputs used in the manufacture of exempted products. The tribunal found that Rule 6(2) and Rule 6(3) together cover the appellant's case as they reversed the amount as per Rule 6(3). The tribunal held that Rule 6(1) does not exclusively apply to the main product but also to byproducts, thus supporting the appellant's stance.3. Manufacturing Process and Product Classification:The adjudicating authority detailed the manufacturing process, noting that two intermediate products arise during centrifusion: centrifuged crystals and uncrystallised solution. The appellant used the uncrystallised solution to manufacture other dutiable products like Peppermint Oil, Menthone, and Terpenes. The tribunal found that the adjudicating authority incorrectly construed that Menthol Crystals (BP/USP Grade) were the main product and other products were byproducts. The tribunal emphasized that the manufacturing process results in both dutiable and exempted products, thus supporting the appellant's claim of following Rule 6(3).4. Application of Case Law:The appellant cited the case of Sharp Menthol India Ltd., where it was held that Menthol Crystals and Peppermint Oil are different final products, and the provisions of Rule 6 of CENVAT Credit Rules, 2004, were rightly followed. The tribunal agreed with this precedent and also referenced the Supreme Court's decision in Bharat Petroleum Corpn. Ltd., which supports the continuous manufacture and sale of both main and subsidiary products. The tribunal concluded that the provisions of Rule 6(2) and Rule 6(3) apply, and the appellant's actions were consistent with these rules.Conclusion:The tribunal held that the impugned order was incorrect and unsustainable. It set aside the order and allowed the appeal with consequential relief to the appellant, affirming that the appellant properly adhered to the provisions of Rule 6(3) of the CENVAT Credit Rules, 2004. The tribunal's decision underscores the importance of interpreting manufacturing processes and product classifications accurately within the framework of CENVAT Credit Rules.