AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (11) TMI 749
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....nally exempt from duty. In accordance with the provisions of Rule 6(1) of Cenvat Credit Rules, 2004, Cenvat Credit Rules shall not be available on such quantity of inputs which are used in the manufacture of exempted goods, except in the circumstances mentioned in Rule 6(2) ibid. In accordance with the provisions of Rule 6(2) of the Cenvat Credit Rules, 2004, when a manufacturer of excisable goods has used cenvat credit availed inputs or input services in or in relation to the manufacture of dutiable excisable goods as well as exempted excisable goods, he shall either maintain separate account and inventory of the inputs/input services used in or in relation to the manufacture of dutiable and exempted final products and take cenvat credit only in respect of the inputs/input services used in or in relation to the manufacture of dutiable final products or if he does not do so, he shall be required to pay an amount in respect of the clearances of exempted final products as per the provisions of Rule 6(3), which is either an amount equal to 5% /10% of the sale value of the exempted final products or an amount equal to the cenvat credit involved in respect of the inputs/input services u....
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....ead with Section 11 AC of the Central Excise Act,1944. 1.3 The above show cause notice was adjudicated by the Addl. Commissioner vide order-in-original no.45/ADDL.COMMR/M-II/2010 dated 30.03.2010 by which the Addl. Commissioner confirmed the above mentioned cenvat credit demand along with interest and imposed penalty of equal amount on the appellant under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act, 1944. In course of proceedings before the Addl. Commissioner , the appellants plea that Rule 11 (3) was not applicable to their case, as along with Menthol flakes and Menthol Crystal, which had become absolutely exempt from duty w.e.f. 1.3.2008, the appellant were also manufacturing DMO and various essential oils derived from DMO, which were dutiable, but this plea was not accepted. 1.4 On appeal being filed to the Commissioner (Appeals) against this order, the Commissioner (Appeals) vide order-in-appeal dated 30.08.2010 upheld the cenvat credit demand along with interest but set aside the penalty under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act, 1944 holding that penalty is not sustainable....
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....ditionally exempt from duty w.e.f. 1.3.2008, the provisions of Section 11 (3) of Cenvat Credit Rules, 2004 would become applicable, as the appellant were availing input duty credit in respect of the inputs Crude Menthol used in the manufacture of Menthol flakes and Menthol Crystals, that since the DMO and fractions of DMO are only a by-product and the main products are Menthol and Menthol Crystal, the provisions of Rule 11(3) had become applicable w.e.f. 1.3.2008 when the main product had become fully exempt notwithstanding the fact that the by-products - DMO/DMO fractions remained dutiable, that the word 'excisable' in Rule 6(6) of the Cenvat Credit Rules, 2004 has to be interpreted as dutiable and since the main final products were no longer dutiable w.e.f. 1.3.2008, the provisions of Section 11(3) of the Rules would become applicable, that no evidence has been produced by the appellant in support of their plea that during the period of dispute, their finished products were being exported out of India and that in view of this, there is no infirmity in the impugned order upholding the cenvat credit demand. With regard to the Revenues appeal, she pleaded that since the confi....
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....sp; Sub-rule (3) of Rule 11: [(3) manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if, - (i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under section 5A of the Act; or (ii) the said final product has been exempted absolutely under section 5A of the Act, and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported. 7.1 From a perusal of this sub-rule, it is clear that this sub-rul....
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....s /input services used in or in relation to the manufacture of dutiable final products and if he does not maintain such account, he is required to pay an amount as per the provisions of sub-rule (3) of Rule 6. Sub-rule (3) gives an option either to pay an amount equal to 5% /10% of the sale value of the exempted final products at the time of their clearance or pay an amount equal to the proportionate cenvat credit in respect of the inputs used in the manufacture of exempted final products to be calculated as per the formula prescribed in this sub-rule. The appellant's contention is that the provisions of sub-rule (1), (2) and (3) would not be applicable, as the finished products including the exempted final products have been exported out of India under bond, and hence, they will be covered by exceptions mentioned in the sub-rule(6) of Rule 6 and in this regard, they rely upon the judgements of Hon'ble Bombay High Court in the case of Sharp Menthol India (supra) and Repro India (supra), judgement of the Hon'ble Delhi High Court in the case of Punjub Stainless Steel (supra) and judgement of the Hon'ble Himachal Pradesh High Court in the case of Drish Shoes (supra), wherein it has be....