2016 (1) TMI 203

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....ort and only marginal quantity of the production was removed to their multi locational unit and local sales. Appellant used to procure duty paid yarn produced locally and were using the same for the manufacture of grey fabrics. Appellant did not execute any bond for export of the grey fabrics as required on an understanding that the clearances were exempted from payment of duty. The issue involved in this case is grey fabrics which was exported by the appellant being exempt from payment of duty by virtue of Notification No. 05/98 dated 02.06.1998 and availed CENVAT credit of the duty paid on yarn and was not maintaining separate accounts, appellant was issued a show-cause notice for demand of 5% or 10% of the value of goods cleared for expo....

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....d the CENVAT credit of the duty paid on yarn for a simple reason that the said yarn was exclusively used for the manufacturing of grey fabrics and grey fabrics were exempted from payment of duty. He would then draw our attention to the provisions of Rule 57C as also the Rule 57CC of Central Excise Rules, 1944 and submit that having not maintained separate records, the CENVAT credit availed on the goods i.e. yarn, they are liable to reverse the entire amount of CENVAT credit and the extended period was correctly invoked. 5. We have considered the submissions made at length by both sides and perused the records. 6. The issue involved in this case is whether the appellant has correctly availed the CENVAT credit on yarn which was purchase....

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....nd that the yarn which is procured by them locally is duty paid remains undisputed and they are eligible to avail CENVAT credit is also undisputed. 6.5 The only question Revenue raises is of disallowing the CENVAT credit on the ground that the yarn which is procured is used for grey fabrics which is exempted. We find that the appellant has used locally procured yarn as well as in-house manufactured yarn for manufacturing of grey fabrics which are either exported or consumed in their own sister unit. If that be so when the clearances are effected to the sister unit appellant availed the benefits of Notification 05/98-CE and paying concessional rate of duty of 5%, hence it cannot be said that appellant had manufactured only exempted goods ....

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....visions of sub-rule (1), the manufacturer shall pay an amount equivalent to the credit of duty attributable to inputs contained in such final products at the time of their clearance from the factory. (9) In respect of inputs (other than inputs used as fuel) which are used in or in relation to the manufacture of any goods, which are exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty, the manufacturer shall maintain separate inventory and accounts of the receipt and use of inputs for the aforesaid purpose and shall not take credit of the specified duty paid on such inputs." 6.6 It can be seen from the above reproduced provisions of Rule 57CC, sub-rule (3) specifically talks about non app....