CENVAT Credit Rule 11(3) of CENVAT Credit Rules (CCR) is applicable only when all final products become fully exempt from duty, is rule would have no application if from common CENVAT credit availed inputs or . services more than one final product are manufactured and some of them have remained dutiable. Further, in terms of Rule 6(6), reversal of CENVAT credit under Rule 6 of CCR is not applicable even when exempted excisable goods are exported- Refund under Rule 5 is admissible.
Pathik Shah
Commissioner of Central Excise vs. Sharp Mentbol (India) Ltd. [2015] 54 taxmann.com 153 (New Delhi - CES- TAT)
CENVAT Credit Rule 11(3) of CENVAT Credit Rules (CCR) is applicable only when all final products become fully exempt from duty, is rule would have no application if from common CENVAT credit availed inputs or . services more than one final product are manufactured and some of them have remained dutiable. Further, in terms of Rule 6(6), reversal of CENVAT credit under Rule 6 of CCR is not applicable even when exempted excisable goods are exported- Refund under Rule 5 is admissible.
FACTS:
The assessee availed CENVAT credit of duty paid on inputs received from Jammu & Kashmir under Rule 12 of CCR. Prior to 01-03-2008, all final products of the assessee were dutiable. However, with effect from 01/03/2008, two of the final products became fully and unconditionally exempt from Central Excise duty while the others remained dutiable. The department contended that the assessee could not avail CENVAT credit as the main final product was fully exempt from duty. As on 01/03/2008 there was some opening balance of the CENVAT credit, which according to the department, was neither utilizable against duty payable on dutiable final product nor entitled refund under Rule 5 at CCR, m terms at of the provisions of Rule 11(3) of the CENVAT Credit Rules, 2004. The assessee contended that Rule 11(3) is not applicable and that the two exempted final products were exported out of India and therefore, in terms at the provisions of Rule 6(6)(v) of the CENVAT Credit Rules, they were eligible for input duty credit
HELD:
According to Rule 11(3), when dutiable goods are subsequently exempted, the balance CENVAT credit lapses and cannot be utilised for any purpose. However, this rule has no application if from common CENVAT credit availed inputs or input services, more than one final product are manufactured and out of these final products, only one final product has become fully exempt and others have remained dutiable. The credit in balance can still be utilised for payment of duty on the final products which have continued to be dutiable as in terms of Rule 3(4)(a) of the CENVAT Credit Rules, 2004, CENVAT credit can be utilised for payment of excise duty on any final product and section 11(3) cannot be given an interpretation which is in conflict with the provisions of Rule 3 (4). The provisions of sub-rules (1), (2), (3) and (4) of Rule 6 are subject to provisions of Rule 6(6) of CCR. The term "excisable goods" in Rule 6(6) of CCR is wide enough to include both dutiable as well as exempted goods and CENVAT credit in respect of inputs used in the manufacture of fully exempt goods which .s exported under bond/letter of undertaking would be a admissible and Rule 6(6)(v) would be applicable.
After the Amendment made to Notification No. 42/01-CE (NT) dated26-06-2001 by amending Notification dated 26-052010, the goods which are fully exempt from duty or are chargeable to nil rate of duty cannot be exported under bond under Rule 19 and accordingly, if for manufacture of such exempted goods, any duty paid inputs have been used, the CENVAT credit of the duty paid on the inputs cannot be availed. Since this amendment adversely affects the manufacturers, the same cannot be given retrospective effect. As neither Rule 11(3) nor Rule 6(1) is applicable in this case, the assessee would be allowed the refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004.
The Hon'ble Tribunal, in this matter also reiterated a principle laid down by the Apex Court in the case of CCE, vs. Ballarpur Industries Ltd. 2007 (215) E. L. T 489, that if some allegations based on certain evidence have not been made in the show cause notice, the Adjudicating Authority or the Appellate Authority cannot travel beyond the show cause notice and decide the matter by taking into account allegations not been mentioned in the show cause notice.