Fertilizer manufacturer entitled to 1% concessional excise duty despite using CENVAT credit on common input services under Rule 6(5)

CESTAT Kolkata held that the appellant fertilizer manufacturer was entitled to concessional excise duty rate of 1% under Notification 1/2011-CE despite utilizing CENVAT credit on common input services under Rule 6(5) of CENVAT Credit Rules, 2004. The tribunal found that Rule 6(5) has overriding effect and the restriction applies only when services are exclusively used for exempted goods manufacture. Since appellant used the credit for payment of duty on other dutiable products like Phospho Gypsum, Sulphuric Acid and Phosphoric Acid, the restriction was inapplicable. The demand for duty, interest and penalty was set aside and appeal allowed.

---

---

Issues Involved:
1. Eligibility for concessional rate of duty under Notification No. 1/2011-CE.
2. Availment of CENVAT Credit on input services under Rule 6(5) of the CENVAT Credit Rules, 2004.
3. Invocation of extended period of limitation for demand.

Summary:

Issue 1: Eligibility for Concessional Rate of Duty
The primary issue is whether the Appellant is liable to pay excise duty on the manufacture and clearance of Di-Ammonium Phosphates (DAP) and Nitrogen Phosphorus and Potassium (NPK) due to the alleged contravention of Notification No. 1/2011-CE dated 01.03.2011. The Appellant contended that they have not availed any CENVAT Credit on inputs and input services exclusively used for the manufacture of DAP & NPK, which are cleared at a concessional rate of 1% duty. The Department argued that the Appellant is not eligible for the concessional rate since they availed CENVAT Credit on common input services.

Issue 2: Availment of CENVAT Credit on Input Services
The Appellant availed CENVAT Credit on certain input services specified under Rule 6(5) of the CENVAT Credit Rules, 2004, such as maintenance or repair service, transport of goods by road service, and security service. The Appellant argued that Rule 6(5) has an overriding effect over sub-rules (1), (2), and (3) and allows credit on specified services unless used exclusively for exempted goods. They utilized the credit for payment of duty on other dutiable products like Phospho Gypsum, Sulphuric Acid, and Phosphoric Acid, not on DAP or NPK. The Tribunal observed that Rule 6(5) permits full credit on specified services even if part of such services is used in exempted business, as long as they are not exclusively used for exempted goods.

Issue 3: Invocation of Extended Period of Limitation
The demand was raised by invoking the extended period of limitation. The Tribunal referred to precedents, including Commissioner of C.Ex., Belapur v. Elder Pharmaceuticals Ltd. and Oil & Natural Gas Corporation Ltd. v. Commissioner of C.Ex., S.T. & Cus., Raigad, which supported the Appellant's position. It was held that the Appellant is entitled to avail CENVAT Credit on the specified services under Rule 6(5) and that the extended period of limitation is not invokable.

Conclusion:
The Tribunal concluded that the Appellant is eligible for the concessional rate of duty @1% under Notification No. 1/2011-CE and set aside the demand of duty, interest, and penalty confirmed in the impugned order. The appeal was allowed with consequential relief as per law.

---