AI Drafter 
TaxTMI 
TaxTMI 
2016 (10) TMI 474
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.... is required to supply the pipes without payment of duty. If GMADA failed to get the exemption certificate, in that case duty is to be paid on the pipes. The said supply order was further issued by M/s WPL to M/s WCL on 20^th July, 2012. M/s WCL on receipt of the purchase order, procured the inputs and availed cenvat credit therein and started manufacturing the pipes. On 20^th August 2012, GMADA was able to obtain exemption certificate, in that circumstances, M/s WCL cleared the pipes during the period September 2012 till 04/11/12 without payment of duty as per the exemption certificate on payment of an amount equal to 6% of the value of goods cleared by them. On 05/11/12 M/s WPL further issued a purchase order for supply of pipes on M/s WCL on payment of duty, as no exemption is available for those pipes. From 5/11/12 onwards, M/s WCL was clearing pipes without payment of duty as well as on payment of duty. 3 . On the basis of intelligence that M/s WCL is availing cenvat credit of duty paid on inputs used for manufacture of exempted goods, the proceedings were initiated against both the appellants. After detailed enquiry, a show cause notice was issued to both the appella....
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....ported the impugned order. 6. Heard the parties considered the submissions. 7. On careful consideration of the submissions made by both the sides, we find that facts of the case are not in dispute that on 05/3/12 GMADA issued a purchase order on M/s WPL for supply of pipe of particular quantity with a condition that if GMADA is able to obtain exemption certificate, prior to supply of the goods, in that case no excise duty is payable on the said goods and if GMADA fail to obtain exemption certificate, the duty is payable. The sole contention of the Revenue is that as till 05/11/12 the appellant (WCL) has cleared exempted final product, which was not liable to pay duty under the exemption certificate obtained by GMADA in that circumstances M/s WCL is not entitle to take cenvat credit on inputs. We do agree with the contention of the learned AR that if the appellant is manufacturing only and only exempted final product, the appellant is not entitled to avail cenvat credit on inputs but in this case at the time of procurement of order by M/s WCL from M/s WPL on 20^th July, 2012, the character of the final goods was....
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....ider Rule 6. On a plain reading of Rule 6(1), it is obvious that if inputs are used in the manufacture of exempted goods, credit is not allowed except in the circumstances mentioned under sub-rule (2) which has already been reproduced. A manufacturer who avails of Cenvat credit in respect of inputs used in the manufacture of final products which are chargeable to duty as also exempted goods, the manufacturer has to maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs used for the manufacture of exempted goods and takes Cenvat credit only on that quantity of inputs which are used in the manufacture of dutiable goods. A plain reading of this rule does not lead to any ambiguity, absurdity or defeat the provisions of the Act. The submission on behalf of the respondents that this would defeat the provisions of the Act and the rules, atleast we are not in a position to understand on a clear and literal interpretation of Rule 6(2). Rule 6(1) and Rule 6(2) read together mean that inputs used in the manufacture of exempted products no cenvat credit is allowed. It may however happen ....
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....nt to the credit attributed to the inputs used in relation to the manufacture of such final products at the time of clearance from the factory. This argument in our opinion has no relevance in construing Rule 6(1) and 6(2). Further, in the case of Sobha Developers Ltd. vs. CCE, LTU, Bangalore (supra), this Tribunal again observed as under : - "15. According to Rule 2(e) of Cenvat Credit Rules, 2004, "exempted service" means taxable services which are exempted from the whole of the service tax leviable thereon and includes service on which no service tax is leviable under Section 66 of the Finance Act. It was submitted on behalf of the appellant that exemption contemplated under Rule 2(e) of Cenvat Credit Rules, 2004 is not an absolute and unconditional exemption and Rule 6(1) does not cover exemptions which are subject to condition and tax is recoverable from the supplier or from the receiver if the conditions are not fulfilled. The learned Counsel relied upon the decision of the Tribunal in the case of Bajaj Tempo Ltd. v. C.C.E., Pune [1994 (69) E.L.T. 122 (Tri.-Mumbai)] in which a view was taken that even though Notification No. 217/86, dated 2-4-1986 is an exemp....
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....uch cases Notification 217/86 can be availed. They also can take Modvat credit on primary inputs used in the manufacture of secondary inputs (M. V. parts, I.C. engines) so long as the final product namely Motor vehicle pays duty. Hence, we are to agree with the ld. counsel Shri Lodha that Notification 217/86 stands on a different footing, when it comes for consideration for purposes of applying Rule 57C. It is not like any other exemption, where intention is to forego the levy on the products cleared from the factory. ........................................ 7.4 Another argument of ld. JDR is that in the case of exemption applicable to products removed to 100% EOU, a specific exception has been made in Rule 57C and in the absence of any such exception being provided in the case of Notification 217/86, such products cleared under Chapter X procedure for further manufacture of final products in terms of the above Notification 217/86, are only to be construed as goods exempted, thereby attracting Rule 57C. We have carefully considered this argument. But we find that in the case of exemption for goods removed to 100% EOU, such products are totally exempted and ev....
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....r the final product should be exempted, which situation can arise only when there is an exemption notification issued under Section 5A of the Central Excise Act or the final product is chargeable to nil rate of duty. Expression chargeable to nil rate of duty or exempted from whole of duty was considered by the Tribunal in the case of Orissa Synthetics Ltd. v. Collector of Central Ex. [1995 (77) E.L.T. 350 (Tri.)] and after taking note of the Ministries clarifications issued vide Circular No. 10/75/CX. 6, it was held that clearance under goods under provision of 191BB for export without payment of duty would not get covered by the above expression. Reference was made to the advice received from the Ministry of Law dealt in the paragraph of 9 in the said decision. It was opined in the said letter of the Law Ministry that the term 'exempted' has a definite connotation. The same as attributed to the notification issued by the Central Government. Similarly, the chargeable to nil rate of duty would refer to the tariff rate being nil and the goods cleared in terms of provision of Rule 199BB would not be covered by the said expression inasmuch as the same are not chargeable to nil rate. In....
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....986. As stated above, the Notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer." By applying the ratio of the above decision, it becomes clear that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C. Inasmuch as, the matter stands decided by the Honourable Supreme Court, we would hold in favour of assessee." In view of the above discussion, we hold that the Notification No. 4/2004-S.T., dated 31-3-2004 read with Rule 25 of SEZ Act, 2005 [(sic) Rules, 2006] is a conditional exemption and therefore, the above decisions apply and demand/restriction under Rule 6 of Cenvat Credit Rules, 2004 would not apply". Further, in the case of Brindavan Beverages Pvt. Ltd. vs. CCE, Meerut (supra) this Tribunal has observed as under :- "7. A question arises as to when capital goods are used for manufacture of dutiable as well as exempted final prod....
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....bout the use of inputs by him can be operated so as to dis-entitle the manufacturer from availing Modvat credit at all in respect of final product/goods manufactured by him which is exempt from whole Duty or is chargeable to nil rate of duty or is not chargeable to duty at all. Rule 57CC does not speak of adjustment of any duty which is not ultimately paid on the final product on clearance due to certain contingency arising in future. In other words, the availing of Modvat credit is not postponed. When Rule 57CC operates at the time when the assessee claims his entitlement to Modvat credit and state of affairs existing at that time can alone be seen to find out whether the end product of the assessee which is more than one are chargeable to duty or are exempted from the whole of the duty or are chargeable to nil rate of duty. 33. It can be seen from yet another angle. In case inputs are received in factory and used in manufacture of end product. But the end product is destroyed by fire before stage of its removal from factory premise. In such circumstances, no excise duty becomes payable on end product. Yet Modvat credit availed on inputs used in destroyed goods is no....