TaxTMI 
TaxTMI 
2013 (4) TMI 80
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....r 8-7-2004. Thus, w.e.f 9-7-2004, finished products manufactured by the appellant became "exempted goods" within the meaning of this term as defined in Rule 2(d) of the Cenvat Credit Rules, 2002 and Cenvat credit, if any, availed on the inputs used in or in relation to manufacture of the final products was no longer admissible in terms of the provisions of Rule 6(1) of the Cenvat Credit Rules, 2004. The appellant reversed the Cenvat credit in respect of the inputs lying in stock as on 8-7-2004. However, they did not pay amount equal to the Cenvat credit involved on the inputs in process and the inputs contained in the final products in stock as on 8-7-2004. The total Cenvat credit in respect of the such inputs was Rs. 90,483/-. The Department in view of the provisions of Rule 6(1) of Cenvat Credit Rules, 2002, according to which, no Cenvat credit is available on the quantity of the inputs used in the manufacture of exempted goods, issued a show cause notice for recovery of the Cenvat credit on the inputs in process and inputs contained in the finished products lying in stock as on 8-7-2004. The show cause notice also sought recovery of interest on this amount and imposition of pena....
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....as the goods which are exempt from whole of the duty leviable thereon and includes the goods which are chargeable to nil rate of duty. Thus, there is no doubt that w.e.f 9-7-2004, the final product of the appellant became exempted goods. While Rule 3(1) of the Cenvat Credit Rules, 2002 provided for availment of Cenvat credit of specified duties by a manufacturer in respect of the inputs or capital goods received in the factory and sub-rule (2) of Rule 3 also provided that notwithstanding anything contained in sub-rule (1), the manufacturer or producer of final products shall be allowed to take Cenvat credit of duty on the inputs lying in stock or in process or inputs contained in the final product lying in stock on the date on which the goods cease to be exempted goods, or become excisable goods. Rule 6(1) provided that "Cenvat credit shall not be allowed on such quantity of inputs which is used in the manufacture of the exempted goods except in the circumstances mentioned in sub-rule (2). Sub-rule (2) of Rule 6 covers a situation where a common cenvated inputs are used for manufacture of dutiable and exempted final products and this rule gives two options to the manufacturer - eit....
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....le (2), which inter alia requires separate accounting of inputs, are not applicable to the fuel-input(s). However, the said sub-rule (2) nowhere says that the legal effect of sub-rule (1) will stand terminated in respect of fuel-inputs which do not fall in sub-rule (2). In other words, the legal effect of sub-rule (1) has to be applied to all inputs including fuel-inputs, only exception being non-fuel-inputs, for which one has to maintain separate accounts or in its absence pay 8%/10% of the total price of the exempted final products. Therefore sub-rule (1) shall apply in respect of goods used as "fuel" and on such application, the credit will not be permissible on such quantity of fuel which is used in the manufacture of exempted goods. In our view, the above aspect has not been properly appreciated by the Gujarat High Court in the above case of M/s. Gujarat Narmada Valley reported in 2006 (193) E.L.T. 136 (supra). 7. Following the ratio of the above judgment of the Apex Court, Division Bench of this Tribunal in the case of Ranbaxy Laboratories Ltd. v. CCE, Chandigarh reported in 2010 (253) E.L.T. 578 (Tribunal-Delhi) has held that when the finished products became fully e....
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.... manufacturer changes from duty paying statuts to full exemption status, was nowhere discussed, as this was not the question before the Hon'ble Court. In our view, this question has been addressed by the Apex Court only in its judgment in the case of Gujarat Narmada Fertilizers Corporation (supra) and it is this judgment which is applicable to this case. The Larger Bench judgment in case of HMT v. CCE (supra) is per incuriam. 8. If the appellant's plea is accepted and the judgment of the Larger Bench in case of HMT v. CCE (supra) is accepted as correct, it would enable an assessee expecting his product to become fully exempted, as happens in case of assessee availing full duty exemption under a notification based on value or quantity of clearances in a financial year or area based Exemption No. 49/2003-C.E. or 50/2003-C.E., etc., plan his input receipts in such a manner by purchasing inputs far in excess of his requirement during the period when his product is dutiable, that he always has enough Cenvat credit so as to be able to pay entire duty through Cenvat credit and use the Cenvat credit availed inputs in the manufacture of exempted goods without having to reverse the c....