Tribunal: Exemption for Reprocessed Polypropylene Granules Upheld

The Tribunal ruled in favor of the appellant, finding that the demand for a specified percentage of the sale price of exempted Reprocessed Polypropylene Granules (RPG) under Rule 6(3)(b)/Rule 6(3)(i) of the Cenvat Credit Rules, 2004 was not applicable. The Tribunal emphasized that since duty was already paid on waste/scrap used in both dutiable goods and RPG, and no further credit was availed, Rule 6 did not apply. The appellant's argument that no credit was taken on identifiable inputs for RPG production was accepted, leading to the setting aside of the impugned order and allowing the appeal with any consequential relief.

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Issues:
Demand of specified percentage of sale price of exempted Reprocessed Polypropylene Granules (RPG) under Rule 6(3)(b)/Rule 6(3)(i) of Cenvat Credit Rules, 2004.

Analysis:
The judgment revolves around the dispute concerning the demand for a specified percentage of the sale price of exempted RPG under Rule 6(3)(b)/Rule 6(3)(i) of the Cenvat Credit Rules, 2004. The company, engaged in manufacturing Biaxially Oriented Polypropylene Films (BOPP Films), generates waste and scrap during the manufacturing process, which is used to produce exempted RPG. The company does not avail CENVAT credit on the duty paid for the waste and scrap used in RPG production. It is argued that since duty is already paid on the intermediate waste/scrap and no further credit is availed, the demand under Rule 6 is not applicable. The appellant relies on precedents like Texmo Industries and Tata Chemicals Ltd., emphasizing the discharge of duty at the intermediate stage exempts the final product from additional duty payment.

The appellant contends that the inputs used for RPG production are identifiable, and no credit is availed on them, making Rule 6 inapplicable. Additionally, the input services for which credit is taken are mainly for dutiable final products, not RPG. The respondent argues that the company failed to maintain separate accounts for common inputs as required by Rule 6(2), necessitating payment under Rule 6(3)(b)/Rule 6(3)(i) for the exempted RPG. However, the Tribunal finds that since duty is paid on waste/scrap used in dutiable goods and RPG, both being dutiable, Rule 6 does not apply. The judgment emphasizes that no duty is required for lubricants in the RPG plant where no credit is availed, and the company has already reversed credit on common input services related to RPG manufacturing.

Moreover, the Tribunal cites various judgments, including CGST v. Himmat Glazed Tiles and Jai Balaji Industries Ltd. v. CCE & ST, affirming that no demand is sustainable if credit on common inputs and services is reversed, even post goods removal. Consequently, the impugned order is set aside, and the appeal by the appellant is allowed with any consequential relief.

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