Tribunal rules against 10% demand on exempted goods under Cenvat Credit Rules. (3)

The Tribunal found that the demand of 10% equal to the value of exempted goods cleared by the appellants was not justified under Rule 6(3) of Cenvat Credit Rules, 2004. As the appellants were maintaining separate records for inputs used in dutiable and exempted goods, Rule 6(3) was deemed inapplicable. Therefore, the Tribunal set aside the impugned orders and allowed the appeals with consequential relief, if any.

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Issues:
- Whether the demand of 10% equal to the value of exempted goods cleared by the appellants is justified under Rule 6(3) of Cenvat Credit Rules, 2004.

Analysis:

Issue 1: Demand of 10% equal to the value of exempted goods
The appellants appealed against the demand of 10% equal to the value of exempted goods cleared by them. The investigation revealed that the appellants were not maintaining separate accounts for the quantities of zinc skimming used in the manufacture of dutiable and exempted goods. The appellants argued that they were segregating zinc skimming into zinc ash and zinc metal, and not availing Cenvat credit on inputs used in the manufacture of exempted goods. They contended that the demand was incorrect as they were maintaining separate records. The AR supported the demand based on Rule 6(3) of Cenvat Credit Rules, emphasizing the necessity of maintaining separate accounts for inputs used in both dutiable and exempted goods.

Analysis Continued:

The Tribunal considered the submissions and found that the main issue was the applicability of Rule 6(3) in this case. The show cause notice indicated that the appellants were maintaining separate records for inputs used in dutiable and exempted goods. As the appellants were indeed maintaining separate records, Rule 6(3) was deemed inapplicable. Therefore, the demand for 10% equal to the value of exempted goods was not sustainable. The Tribunal set aside the impugned orders and allowed the appeals with consequential relief, if any.

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