Tribunal overturns Cenvat Credit reversal order under Rule 6(3) Cenvat Credit Rules, 2004

The Tribunal set aside the order demanding reversal of Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004, finding it legally unsustainable. The appellant's argument that Rule 6 did not apply as they did not manufacture exempted goods alongside non-exempted goods was accepted. The Tribunal held that the demand for Cenvat Credit reversal was unfounded, as the appellant only manufactured PP woven fabric and not the cleared empty bags and drums. The appeal was allowed, and the decision was pronounced on 01/04/2021.

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Issues:
- Applicability of Rule 6(3) of Cenvat Credit Rules, 2004 to the given facts and circumstances.

Analysis:
1. The case involved M/s. Sundaram Packaging India Pvt. Ltd., engaged in manufacturing PP woven fabrics and availing Cenvat Credit on inputs, input services, and capital goods. The Department observed that the appellant cleared non-excisable goods without payment of duty, triggering a Show Cause Notice demanding reversal of Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004.

2. The appellant did not appear in person during the final hearing but requested a decision based on submissions. The Department highlighted an amendment in Rule 6 through Notification No.6/2015, emphasizing that non-excisable goods cleared for consideration fall under exempted goods, warranting Cenvat Credit reversal. The appellant cited an order by the same Commissioner, stating that payment was not required for discarded scrap sales.

3. The Tribunal analyzed Rule 6(3) of Cenvat Credit Rules, 2004, which applies to manufacturers dealing with both exempted and non-exempted goods or services. The appellant only manufactured PP woven fabric, not the cleared empty bags and drums. The Tribunal referenced the amendment specifying that exempted goods include non-excisable goods cleared for consideration, but clarified that Rule 6 applies to inputs used in manufacturing exempted goods alongside non-exempted goods.

4. Referring to legal precedents, the Tribunal concluded that Rule 6 was wrongly invoked as the appellant did not manufacture exempted goods alongside non-exempted goods. Citing judgments on excise duty for non-manufactured products and duty on containers used for packing, the Tribunal held that the demand for Cenvat Credit reversal was unfounded. The Commissioner's assertion that the bags and drums were excisable goods was deemed incorrect.

5. Consequently, the Tribunal set aside the order, deeming it legally unsustainable. The appeal was allowed, and the decision was pronounced in open court on 01/04/2021.

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