2017 (9) TMI 337 - AT - Central Excise

Tribunal decision favors manufacturer in dispute over Cenvat Credit Rule exemption

M/s. S.U. Motors Pvt Ltd Versus Commissioner of Central Excise, Mumbai-III

The tribunal ruled in favor of the appellant, a manufacturer of P.D. Pumps, in a dispute over the applicability of Rule 6(3)(a) of Cenvat Credit Rules, ... Reversal of CENVAT credit - inputs - Rule 6(3) (a)/Rule 57 AD - case of the department is that since part of supplies were made claiming exemption N/N. 10/97-CE, they are required to pay 8%/ 10% of the total price in terms of Rule 6(3) (a)/Rule 57 AD - Held that: - the appellant have manufactured P.D. Pump, which is per se not exempted goods. However, they have cleared part of their manufactured goods i.e. P.D. pump under Notification No.10/97-CE and 3/2004-CE, where supplies made to Indian Navy - Rule 6(3) shall be applicable only when manufacturer of the goods manufacture goods of two types, one is excisable and another is exempted. However, in case where goods manufactured are dutiable at the time of manufacture, Rule 6(3) will not be applicable. Similar issue decided in the case of COMMISSIONER OF CENTRAL EXCISE, THIRUNELVELI Versus DCW LTD. [2008 (10) TMI 380 - MADRAS HIGH COURT], where it was held that For the provisions of Rule 57CC(1) to apply, there should be one final product which is dutiable and another final product which is exempted from payment of duty or chargeable to “Nil” rate of duty. Appeal allowed - decided in favor of appellant. Issues:1. Interpretation of Rule 6(3)(a) and applicability to goods claimed under exemption notification.2. Whether the appellant is liable to pay 8%/10% value of exempted goods under Rule 6(3)(a) of Cenvat Credit Rules, 2002.3. Comparison of arguments presented by both parties regarding the dutiable nature of the manufactured goods.4. Analysis of previous tribunal decisions and their relevance to the current case.5. Evaluation of judgments cited by both parties to support their arguments.6. Determination of the applicability of Rule 6(3) based on the nature of manufactured goods.7. Final decision on the appeal and consequential relief, if any.Analysis:1. The appellant, engaged in manufacturing P.D. Pumps, supplied goods to the Indian Navy under an exemption notification. The dispute arose regarding the payment of 8%/10% of the total price of exempted goods under Rule 6(3)(a) due to the claimed exemption. The department demanded this amount, leading to the appeal.2. The appellant's counsel argued that since all goods were dutiable at the time of manufacture, the exemption-based supplies do not fall under Rule 6(3)(a). Citing previous tribunal decisions, they contended that the exemption notification's end-use basis exempts specific buyers, not the goods themselves, making the demand unsustainable.3. The Revenue's representative countered, asserting that as the appellant knew the inputs were for exempted goods, Rule 6(3)(a) applies. They relied on other judgments supporting their position, emphasizing the dutiable nature of the manufactured goods alongside the exempted supplies.4. The tribunal examined the nature of the P.D. Pumps and the exemption scenario. Referring to past decisions like DCW Ltd and Tanfac Industries Ltd, it concluded that Rule 6(3) applies only when goods of two types are manufactured, one dutiable and the other exempted. Since the goods were dutiable at manufacture, the rule did not apply.5. The tribunal differentiated the cited judgments, noting that they did not address end-use-based exemptions like the present case. Consequently, it set aside the impugned order, allowing the appeal with appropriate relief as per the law.This comprehensive analysis covers the interpretation of Rule 6(3)(a), the arguments presented by both parties, the relevance of previous tribunal decisions, and the final decision on the appeal, providing a detailed understanding of the judgment.