TaxTMI 
TaxTMI 
2010 (12) TMI 166
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....lusively used in the manufacture of the above three exempted final products. The Commissioner confirmed demand of the above amount, applicable interest against APL and imposed penalty of Rs.10/- lakh on it. While confirming the demand, the Commissioner considered the fact that the assessee had already reversed credit to the tune of Rs.54,88,499/- relatable to inputs cleared as such. 2.The facts of the case in brief are as follows. The show cause notices had proposed to demand the cenvat credit relatable to the following : i. On the exclusive inputs used in the manufacture of exempted goods which were cleared on payment of 10% of the sale price of the exempted goods; ii. On the exclusive inputs removed as such; iii. On the exclusive inputs used in the finished goods exported; iv. On the exclusive inputs used in the finished goods removed to 100% EOU; v. On the exclusive inputs lying in stock; vi. On the exclusive inputs used in the finished goods lying in stock. The assessee manufactured both dutiable and exempted bulk drugs and opted not to maintain separate accounts for dutiable and exempted goods envisaged under Rule 6 (3) of Cenvat Credit Rules, 2002/2004. Th....
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.... 848 (Tri.-Chennai) (ii) Jobelle Vs. CCE, Mumbai I - 2006 (203) ELT 627 (Tri.-Chennai) (iii) Punjab Stainless Steel Industries Ltd. Vs. CCE, Delhi - 2008 (226) ELT 587 (Tri.-Delhi) In holding that inputs used in the dutiable goods alone were eligible for taking credit, the Commissioner had relied on the judgment of the Honrable Andhra Pradesh High Court in WP No.16909/2006 dt 23.11.2007. This judgment was no more valid in view of the admission of fresh WP No.2747/2009 WPMP No.3532/2009 by the Honrable Andhra Pradesh High Court pursuant to the direction contained in Supreme Court order in SLP No.4969/2008. Moreover the vires of Explanation - III of Rule 6 (3) of CCR was pending before the Honrable Andhra Pradesh High Court. The credit involved on this account was Rs.30,76,934/- which had already been paid by the appellant under protest. 3.1The demand of Rs.12,01,12,418/- pertaining to exclusive inputs used in the exempted finished goods exported / removed to EOU, in the impugned order was contrary to the law laid down by the Honrable High Court Bombay in the case of Repro India Ltd. (supra). 3.2As regards the denial of credit on the exclusive inputs lying in the factory a....
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....s, except in the circumstances mentioned in sub-rule (2). [Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.] (2)?Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, [ *?*?* ], and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable. (3)?Notwithstanding anything contained in sub-rules (1....
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....an amount equal to ten percent of the total price, excluding sales tax and other taxes, if any, paid on such goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory; (c) the provider of output service shall utilize credit only to extent of an amount not exceeding twenty per cent of the amount of service tax payable on taxable output service. Explanation I The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the CENVAT credit or otherwise. Explanation II If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 14, for recovery of CENVAT credit wrongly taken. Explanation III For the removal of doubts, it is hereby clarified that credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted services. (4)?No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempt....
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....antity of input or input service used in the manufacture of exempted goods or for provision of exempted services , except in circumstances specified in sub rule (2). As per sub rule (2), where a manufacturer or provider of output service avails of CENVAT credit and manufactures such final products or provides such output services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable. As per sub rule (3) the manufacturer or provider of output service opting not to maintain separate accounts shall follow either of the follwing two conditions , as applicable to him, namely :- (a) if the exempted goods are . (b) if the exempted goods are other than those described in condition (a), the manufactur....
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....provided in Rule 14 of CCR. There is no justification to collect 10% of the sale price of exempted goods manufactured using exclusive inputs. There is no legal sanction for such recovery. In the case on hand, sub rules 1, 2, 3 and 4 shall not be applicable in the case of inputs relatable to excisable goods that are removed without payment of duty either to a hundred percent EOU or cleared for export under bond in terms of provisions of Central Excise Rules, 2002. As regards the credit involved in balance inputs and inputs contained in the finished goods in stock, we find that these demands are premature. The recovery of input credit involved in these cases shall be regulated in the manner we have indicated, namely, subject to sub-rule (6) of Rule 6 of CCR. 5.3 In its judgment in the case of CCE Vs. Drish Shoes Ltd [2010 (179) ELT 0155 (HP)] the Honrable High Court of Himachal Pradesh held that an assessee manufacturing goods chargeable to nil duty is eligible to avail cenvat credit paid on the inputs under the exception clause to Rule 6 (1) as contained in rule 6 (6) of CCR used in the manufacture of such goods, if the goods are expo....