Tribunal rules demand under Cenvat Credit Rules unsustainable

The Tribunal ruled that the demand raised under Rule 6 of Cenvat Credit Rules, 2004 by the Lower Authorities was unsustainable for activities including manufacturing on job work basis, trading of goods on High Seas Basis, and removal of input as such. The appellant's appeal was allowed, and the impugned order was set aside.

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Issues involved:
1. Applicability of Rule 6 of Cenvat Credit Rules, 2004 on activities including manufacture on job work basis, trading of goods on High Seas Basis, and removal of input as such.

Manufacture on job work basis:
The appellant was engaged in manufacturing Brass Rods and was registered with the Central Excise Department. The Department contended that the activities of manufacturing on job work basis, clearance of inputs as such, and trading of goods on High Seas Basis were exempted services, requiring the appellant to pay 7% under Rule 6 of Cenvat Credit Rules, 2004. The appellant argued that credit for input and input service used in job work goods is admissible, citing relevant judgments. The Tribunal held that credit for input and input service used in job work goods under Notification No. 214/86-CE cannot be denied based on explicit provisions, thus ruling the demand related to job work goods as unsustainable.

Trading of goods on High Seas Basis:
Regarding trading of goods on High Seas Basis, the appellant argued that the demand should be set aside as they had reversed the proportionate credit as directed by the audit team, and the Department was aware of the activity. The Tribunal agreed, stating that no further demand invoking Rule 6 could be raised, and the demand was not sustainable due to the knowledge of the Department. Citing the Optel Ceramic Pvt. Ltd. case, the Tribunal upheld the appellant's argument and dismissed the demand under Rule 6.

Removal of input as such:
In the case of removal of input as such on payment of duty, the appellant contended that Rule 6 of Cenvat Credit Rules did not apply since the goods were cleared on payment of duty, not as exempted goods or service. The Tribunal referred to the Mahesh Twisto Tech Ltd. case, where it was held that the removal of input as such on payment of duty should not be included in computing 6% of the value of exempted goods. Consequently, the Tribunal set aside the demand under Rule 6 for this issue as well.

In conclusion, the Tribunal found the demand raised under Rule 6 of Cenvat Credit Rules, 2004 by the Lower Authorities to be unsustainable for all three types of removal of goods. Therefore, the impugned order was set aside, and the appeal was allowed.

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