TaxTMI 
TaxTMI 
2016 (3) TMI 617
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....ton yarn, which was cleared under Notification No.30/2004-CE, dated 09.07.2004 without payment of duty. The case was adjudicated and vide Order-in-Original dated 28.02.2006 the impugned amount was disallowed along with interest and penalty. The said Order-in-Original was upheld vide the impugned Order-in-Appeal dated 04.07.2006. The appellant reversed the impugned credit on 13.06.2005 and the same was appropriated vide the said Order-in-Original. 2. The appellant now contends that although upto 02.02.2006 it utilised the impugned capital goods only for manufacture of cotton yarn, which was cleared duty free under Notification No.30/2004-CE, with effect from 02.026.2016, it also started paying duty on cotton yarn under Notification No.29/....
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....during September 2004 to August 2005 period. There is also no dispute about the fact that during the period till September 2006, the machinery, in question, had been used only for manufacture of fruit pulp based soft drink called MAAZA which is fully exempt from duty. However the appellant had still availed Cenvat credit amounting to Rs. 1,64,08,716/- in respect of these capital goods. According to the appellant, from October 2006 onwards they have started using these machines for manufacture of aerated waters which are dutiable final product and this fact is not disputed by the Department. According to the appellant, they are eligible for capital goods Cenvat credit, as in terms of the provisions of Rule 6(4) of the Cenvat Credit Rules, 20....
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....hole of the duty of excise leviable thereon under any notification, where the exemption is granted based on the value or quantity or clearances made in a financial year. From a perusal of this sub-Rule, it is clear that capital goods Cenvat credit would be admissible when the capital goods are used either only for dutiable final product or for dutiable as well as exempted final product. The capital goods Cenvat credit is also admissible when a manufacturer is availing full duty exemption based on the value or quantity of the goods cleared in a financial year, in which case, while initially the manufacturer will be availing full duty exemption (for some months or for several financial years at a stretch) but subsequently at some point of tim....
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....re of exempted final product and subsequently he switches over to the manufacture of dutiable final product, the capital goods Cenvat credit cannot be denied. When at the time of receipt of capital goods, capable of use in manufacture of dutiable as well as exempted final products, there is evidence to show that the manufacturer had intention to use them for manufacture of dutiable as well as exempted final product, the eligibility of the capital goods for Cenvat credit cannot depend upon the order in which the same are used - whether first for the manufacture of exempted final products or for the manufacture of dutiable final product. We are supported in this view by the judgment of Hon'ble Gujarat High Court in case of CCE, Vadodara II v.....
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.....2005, i.e., before even the Show Cause Notice (dated 25.10.2005) was issued. Also it is just that in the initial phase the appellant cleared yarn duty free under Notification No.30/2004-CE. Both Notifications, i.e., Notifications No.30/2004-CE and No.29/2004-CE could be availed of simultaneously by the appellant and it could have cleared one small consignment of say mere Rs. 100/- on payment of duty under Notification No.29/2004-CE on the date it took the impugned Cenvat credit, in which case arguably, there would have remained no basis to initiate these proceedings. Thus, it is evident that there was no mala fide on the part of the appellant in the present case. Further, it is seen that the recovery of the impugned amount was ordered in t....