2006 (1) TMI 30 - AT - Central Excise

Tribunal clarifies Rule 6: Manufacturers' choice on credit reversal or duty payment respected by Revenue.

MAGTECH MOBILESPARES PVT. LTD. Versus CCE, BELAPUR

The Tribunal clarified the interpretation of Rule 6 of CENVAT Credit Rules, emphasizing that manufacturers availing full exemption under the SSI sector ... Central Excise - Cenvat - SSI Exemption - Assessee availing benefit of SSI exemption has option either to reverse input credit or to pay 8% amount on the exempted finished goods and such option cannot be enforced by the Revenue - Case remanded Issues: Waiver of pre-deposit requirements, interpretation of Rule 6 of CENVAT Credit Rules, enforcement of options by Revenue officers, liability to penalty.In this judgment, the Appellate Tribunal in Mumbai heard an application for waiver of pre-deposit requirements and stay of recovery regarding manufacturers availing Modvat credit and clearing goods at full exempted rates of duty. The Tribunal found that the main appeal could be disposed of, so after waiving the pre-deposit, the appeal was taken up for disposal with the consent of both sides. The Tribunal referred to a Board instruction clarifying that Rule 6 of CENVAT Credit Rules is not meant for manufacturers availing full exemption under the SSI sector notification. It emphasized that if a manufacturer availing SSI duty exemption uses cenvatable inputs to produce exempted goods, the option to reverse the credit or pay duty on finished goods lies with the manufacturer, not the Revenue officers. In the case at hand, both parties agreed that the assessee had chosen to reverse the entire credit amount, which should have been enforced by the department. The Tribunal set aside the order and directed the original authority to determine the amounts to be reversed and enforce such reversal, with the issue of penalty liability to be decided afterward.This judgment clarifies the interpretation of Rule 6 of CENVAT Credit Rules regarding manufacturers availing full exemption under the SSI sector notification. It emphasizes that the option to reverse credit or pay duty on exempted goods lies with the manufacturer, and Revenue officers cannot enforce or alter this choice. The Tribunal's decision underscores the importance of respecting the assessee's chosen option and enforcing it accordingly, rather than imposing recovery based on different grounds. The judgment highlights the need for Revenue officers to adhere to the choices made by manufacturers regarding credit reversal or duty payment on exempted goods.The Tribunal's decision in this case emphasizes the significance of upholding the options chosen by manufacturers regarding the treatment of cenvatable inputs used in the production of exempted goods. It underscores that the department must enforce the manufacturer's chosen option, whether it is to reverse the credit or pay duty, rather than imposing recovery based on its own directives. By setting aside the order and remitting the matter back to the original authority for redetermination of the amounts to be reversed, the Tribunal ensures that the enforcement aligns with the manufacturer's decision, with the issue of penalty liability to be addressed subsequently. This judgment serves as a reminder of the importance of respecting the choices made by manufacturers in such scenarios and enforcing them in accordance with the law.