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2007 (11) TMI 48

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....d 9-7-2004. When any yarn was cleared by availing full exemption, proportionate credit availed on inputs was expunged under Rule 6(3)(a) of the CENVAT Credit Rules, 2004. In a show-cause notice dated 5-1-2007, the department alleged that they were not entitled to follow the procedure under Rule 6(3)(a), which was applicable to a manufacturer who manufactured both dutiable and exempted final products. The department refused to recognise the goods cleared under Notification No. 30/2004-C.E. as exempted goods on account of the fact that the appellants had taken CENVAT credit on the inputs used in or in relation to the manufacture of such goods (a condition expressly stated in Notification No. 30/2004-C.E. to be complied with by a manufacturer ....

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....ling the benefit of the Notification and that, as the appellants had availed CENVAT credit on the inputs used in or in relation to the manufacture of the yarns cleared under the Notification, they were not eligible for the exemption. On this basis, the Commissioner confirmed the above demand of duty with interest thereon against the assessee and imposed on them a penalty of Rs. 1,00,000/-. The present appeal is directed against the Commissioner's order. 2. After hearing both sides and considering their submissions, we note that the short question arising for consideration is whether the benefit of Notification No. 30/2004-C.E. should be denied to the appellants on the ground that they had taken CENVAT credit of the duty paid on the inputs ....