2008 (2) TMI 107

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....zid I.P., both of which are unconditionally exempted from payment of duty. Originally, the appellants were availing SSI exemption. They crossed SSI limit during the course of 2003-04 and, thereupon, started availing Cenvat credit. The department, after verification of records, found that the appellants, after crossing SSI limit, availed Cenvat credit on the inputs used in the manufacture of the aforesaid exempted final products without maintaining separate accounts in respect of inputs used in the manufacture of exempted final products and those used in the manufacture of dutiable final products. Raw materials used in the manufacture of Pyrazinamide I.P., on which Cenvat credit was so availed, were Gelatin (hardening material), Methyl Para ....

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....inasmuch as the inputs in question were used exclusively in the manufacture of the two exempted products and were not common inputs between such products and dutiable final products. Even otherwise, learned Counsel submits, the entire credit having been reversed with interest, it is not open to the department to enforce the demand under Rule 6(3)(b) of the Cenvat Credit Rules. In this connection, reliance is placed on the Tribunal's decision in the cases of Sam Turbo Industry Lid, v. Commissioner of Central Excise, Coimbatore [2008 (84) R.L.T. 67 (CESTAT-Che.)] and Commissioner of Central Excise, Pune-II v. M/s. Indian Hume Pipe Co. Ltd. [2008 (223) E.L.T. 302 (Tri.) = 2008-TIOL-41-CESTAT-MUM} as well as the Apex Court's decision in Chandra....

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.... been shown to have been used in the manufacture of any of the dutiable final products, Rule 6(2) of the Cenvat Credit Rules was wrongly invoked in this case and consequently the demand raised under Rule 6 (3) cannot be sustained. On the above facts, the applicable provision is Rule 6 (1), which mandates that, where the final product is exempted from payment of duty, there shall be no Cenvat credit on inputs admissible to the manufacturer. In this case, apparently, the party reversed the entire credit taken on inputs used in the manufacture of the exempted final products and, that too, with interest. On the above facts, the case is distinguishable from the cases of Sam Turbo Industry Ltd. (supra) and M/s. Indian Hume Pipe Co. Ltd. (supra) i....