Tribunal Rules Cenvat Credit Rules Apply to Mixed Goods; Overturns Commissioner Decision on Duty Recovery.

The Tribunal set aside the order of the Commissioner (Appeals) Central Excise, Chandigarh, allowing the appeal in favor of the appellant. It determined that Rule 6(3) of the Cenvat Credit Rules, 2004, applied since the appellant manufactured both exempted and dutiable goods. Consequently, the recovery of central excise duty was not warranted.

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Issues involved:
The appeal was against the order passed by the Commissioner (Appeals) Central Excise, Chandigarh regarding the recovery of central excise duty on e-bikes and parts thereof.

Summary:

Issue 1: Cenvat Credit on exempted goods
The appellant contended that Cenvat Credit on inputs is not admissible when final products are exempted from duty, as per Rule 6(1) and explanation to Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant argued that since inputs for both dutiable and exempted goods were common and separate accounts were not maintained, they were paying an amount as per Rule 6(3)(i) of the Cenvat Credit Rules, 2004.

Issue 2: Applicability of rules
The Department argued that the appellant did not follow Rule 3(4) of the Cenvat Credit Rules, 2004, leading to a show cause notice for recovery of central excise duty. However, the Tribunal found that the appellant was manufacturing both exempted and dutiable goods, and therefore, Rule 6(3) applied instead of Rule 11(3) of the Cenvat Credit Rules, 2004.

Decision:
The Tribunal referred to a previous decision where it was held that Rule 6(3) applied to the appellant as they were manufacturing both types of goods. The impugned order was set aside, and the appeal was allowed in favor of the appellant.

(Order pronounced in the open court on 14.05.2024)

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