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CENVAT - Rule 6(3)(b) - Eligibility of Credit on inputs used exclusively in exempted goods when 10% amount paid - Finding of fact of CESTAT that inputs are used for both categories - Department not countered fact - Finding of fact cannot be disturbed - Assessee eligible to avail credit: HC

By TIOL News Service

CHENNAI, DEC 09, 2014: IN civil miscellaneous appeal filed by the Revenue, the issue was whether CENVAT Credit can be availed on the inputs used exclusively in the manufacture of goods, which are exempted when assessee had paid 10% under Rule 6(3)(b) the CENVAT Credit Rules, 2004.

Assessee are engaged in the manufacture of gear motor assembly. They supply gear motor for wind mills under exemption and pay duty on clearance to other customers. Department contended that assessee availed CENVAT Credit on the inputs used in the manufacture of exempted goods in violation of Rule 6(1) of the CENVAT Credit Rules, 2004 and demanded duty together with interest and penalty.

High Court held that when the finding of fact of the Tribunal is that the imported inputs were used by the assessee in respect of exempted goods as well as the goods cleared on payment of duty, assessees would be eligible to avail the CENVAT credit.

High Court observed that the case of the assessee falls under clause (b) of sub-rule (3) of Rule 6, which states that the manufacturer should pay an amount equal to ten per cent of the total price and when there is a specific finding by the Tribunal on fact that the inputs had been used by the assessee in respect of exempted goods as well as the goods cleared on payment of duty, the department's plea that components were used exclusively as inputs in the manufacture of exempted goods fails and holds that the assessee are entitled to avail the CENVAT credit.

The High Court further held that on a reading of Rule 6(1) and Rule 6(3), it is clear assessee who had opted not to maintain separate account of inputs in respect of the two categories of clearances, would be entitled to avail the CENVAT credit, if they paid the amount in terms of Rule 6(3)(b) and there can be no other interpretation on the admitted fact.

On the third question as to whether the CESTAT is right in applying the ratio of judgment in the case of Hetero Labs Ltd., v. Commissioner of Central Excise, Hyderabad 2005-TIOL-408-CESTAT-BANG when the said decision has not reached finality, the High Court held that this question of law is totally misconceived. Nevertheless, the High Court observed that the decision rendered by the Tribunal at Delhi in Life Long Appliances Ltd., v. Commissioner of Central Excise, Delhi-III, 2000 (123) ELT 1110 (Tri.Delhi) on an identical issue was tested before the Supreme Court at the instance of Commissioner of Central Excise, New Delhi and the Supreme Court upheld the decision of the Tribunal.

Accordingly, High Court dismissed the appeal filed by the department.

(See 2014-TIOL-2171-HC-MAD-CX)


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