Tribunal allows appeal by Reliance Industries Ltd, finds rule 6 inapplicable. Impugned order set aside.

The Tribunal allowed the appeal by M/s Reliance Industries Ltd, holding that rule 6 of CENVAT Credit Rules, 2004, was inapplicable to the clearances in question. The impugned order was set aside, and the cross-objection was disposed of. The decision was pronounced on 26th September 2022.

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Issues Involved:
1. Eligibility for refund of reversed CENVAT credit under rule 6(3A) of CENVAT Credit Rules, 2004.
2. Classification of 'liquefied petroleum gas (LPG)' as 'exempted goods'.
3. Applicability of rule 6 of CENVAT Credit Rules, 2004 in cases of by-products emerging during manufacturing processes.

Detailed Analysis:

1. Eligibility for Refund of Reversed CENVAT Credit:
The appellant, M/s Reliance Industries Ltd, sought a refund of Rs. 3,18,04,141/- which was reversed in their CENVAT credit account. This amount included Rs. 74,27,104 for 'inputs' attributable to 'liquefied petroleum gas (LPG)' and Rs. 2,43,77,037 excluded according to the formula in rule 6(3A)(c)(iii) of CENVAT Credit Rules, 2004. The Tribunal referenced the decision of the Hon'ble High Court of Gujarat in Principal Commissioner of Central GST and Central Excise v. Reliance Industries Ltd and other related judgments, which supported the appellant's claim that the reversal was improper.

2. Classification of 'Liquefied Petroleum Gas (LPG)' as 'Exempted Goods':
The appellant reversed CENVAT credit under the impression that LPG, when cleared for use under the 'public distribution system (PDS)', was considered 'exempted goods' as per rule 2(d) of CENVAT Credit Rules, 2004. However, the Tribunal noted that in previous cases involving the appellant, it was decided that LPG should not be classified as 'exempted goods'. The Tribunal cited the Gujarat High Court's judgment in Sterling Gelatin, which clarified that by-products emerging during manufacturing processes do not necessitate separate accounting or reversal of credit if the inputs are used primarily for manufacturing dutiable goods.

3. Applicability of Rule 6 of CENVAT Credit Rules, 2004:
The Tribunal examined the applicability of rule 6, which restricts CENVAT credit on inputs used in the manufacture of exempted goods. The Tribunal referenced the Gujarat High Court's decision in Sterling Gelatin and the Supreme Court's ruling in National Organic Chemical Industries Limited, where it was held that by-products emerging inevitably during the manufacturing process do not trigger the provisions of rule 6. The Tribunal concluded that the entire quantity of inputs and input services was used for manufacturing dutiable goods, and the emergence of LPG as a by-product did not reduce the quantity of inputs used for dutiable goods. Therefore, rule 6 was deemed inapplicable.

Conclusion:
The Tribunal established that rule 6 of CENVAT Credit Rules, 2004, was inoperable in the clearances in question. Consequently, the appeal was allowed, and the impugned order was set aside. The cross-objection was also disposed of. The operative part of the order was pronounced in open court on 26th September 2022.

This detailed analysis preserves the legal terminology and significant phrases from the original text, ensuring a thorough understanding of the judgment while maintaining the privacy of the parties involved.

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