2016 (9) TMI 628 - AT - Central Excise

Whether the provisions of Rule 6(3) of the cenvat Credit Rules are applicable or not and whether the Cenvat Credit shall lapse on 29.04.2008 when e-bikes became exempted from levy of duty or not - manufacture of exempted i.e. e-bikes and dutiable i.e. its parts - import of e-bikes in CKD condition and clearing the same alongwith indigenously procured battery and paying 10% of duty thereon - e-bikes are exempted from levy of duty as per Notification No.25/2008 dt. 29.04.2008 - non-maintenance of separate account of inputs of dutiable as well as exempted final products. Held that - We do agree with the observations made by the ld. Commissioner (appeals) and hold that as assessee was not maintaining separate account for inputs used in manufacturing of e-bikes and parts thereof, therefore, provisions of Rules 6(3) are squarely applicable to the assessee as the assessee are manufacturing both dutiable and exempted final product and assessee is liable to pay 10% of the value of e-bikes at the time of their clearance and the cenvat credit lying in their cenvat account shall not lapse wholly but the cenvat credit lying in their cenvat account attributable to inputs, work in progress and finished e-bikes shall lapse. As we hold that the provisions of Rule 6(3) are applicable to the facts of the present case, therefore, the provisions of Rules 11(3) of the Cenvat Credit Rules are not applicable. - Decided in favour of appellant

Summary

Issues:
1. Applicability of Rule 6(3) of the Cenvat Credit Rules.
2. Lapsing of Cenvat Credit on 29.04.2008.

Analysis:
1. The judgment involves appeals by both the Revenue and the assessee against impugned orders regarding the clearance of E-bikes and parts thereof. The dispute arises from the exemption of E-bikes from duty under a notification, leading to questions about maintaining separate accounts and the applicability of Rule 6(3) of the Cenvat Credit Rules.

2. The assessee imported E-bikes in CKD condition and cleared them along with batteries, paying duty. Despite the exemption notification, the assessee paid 10% value of E-bikes on clearance due to not maintaining separate accounts for dutiable and exempted products. The Revenue contended that the cenvat credit would lapse on 29.04.2008, as E-bikes were exempted from duty, leading to show cause notices and demands for duty on parts cleared post-exemption.

3. The main issues revolved around the applicability of Rule 6(3) of the Cenvat Credit Rules and the lapsing of Cenvat Credit on 29.04.2008. The Commissioner (Appeals) noted discrepancies in the registration certificate and observed that the assessee was indeed manufacturing E-bike parts, not just E-bikes, as declared in the registration application.

4. The Tribunal found that the assessee's failure to maintain separate accounts necessitated paying 10% of E-bike value on clearance, as per Rule 6(3). The judgment emphasized that while the cenvat credit attributable to inputs, work in progress, and finished E-bikes would lapse, the entire credit would not lapse. Rule 11(3) of the Cenvat Credit Rules was held inapplicable to the case, ultimately allowing the appeals by the assessee and dismissing those by the Revenue.

5. The Tribunal's decision highlighted the importance of maintaining accurate records and complying with Cenvat Credit Rules. It clarified the treatment of cenvat credit in cases involving dutiable and exempted products, providing a nuanced interpretation of the rules to determine the lapse of credit and duty liability in the context of manufacturing E-bikes and parts thereof.

6. The judgment underscores the significance of adherence to tax regulations and the implications of exemptions on duty liability and cenvat credit. It showcases the judicial approach to resolving disputes arising from complex tax laws and the necessity for businesses to maintain meticulous records to ensure compliance and avoid potential lapses in credit.