SFIS duty credit scrips treated as duty payment, so Rule 6(3) Cenvat Credit obligations do not apply.

Clearance of excisable goods under the SFIS scheme against duty credit scrips is treated as a recognised mode of duty payment, not as exempted removal. On that basis, such clearances do not attract Rule 6(3) of the Cenvat Credit Rules, 2004. The Tribunal also rejected reliance on the CBEC circular, noting that omission of a notification from the circular could not by itself justify treating the goods as exempted. As a result, the demand, interest and penalty were unsustainable.

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Issues: Whether goods cleared under Notification No. 34/2006-CE dated 14.06.2006 under the SFIS scheme are to be treated as exempted goods so as to attract Rule 6(3) of the Cenvat Credit Rules, 2004.

Analysis: The clearance of goods under the SFIS scheme was through duty credit scrips, which operated as a recognised mode of discharging excise duty and not as a case of duty-free exemption. The Tribunal followed its earlier decisions holding that debits in SFIS scrips amount to payment of duty and that such clearances cannot be equated with exempted clearances. The reliance placed on the CBEC circular did not assist the Revenue because the circular was read on assumption that omission of a notification from the circular made Rule 6(3) applicable, which was not a permissible interpretation.

Conclusion: Rule 6(3) of the Cenvat Credit Rules, 2004 was held to be inapplicable, and the demand, interest, and penalty were unsustainable.

Ratio Decidendi: Clearance of excisable goods against SFIS duty credit scrips is a mode of duty payment and does not amount to exempted removal; consequently, Rule 6(3) of the Cenvat Credit Rules, 2004 does not apply.

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