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2024 (1) TMI 635 - AT - Central ExciseCENVAT Credit - demand of 10% of the clearance value of exempted product under Rule 6 (3) of CCR - credit availed on capital goods allegedly used exclusively in manufacture of exempted product and lying in balance as on 07.12.2008. Whether the fact that the show cause notice proposed the demand of 10% under Rule (3) of Cenvat Credit Rules and the order confirming the demand under Rule 11(3) of Cenvat Credit Rules, 2004 is beyond the charges made in the show cause notice and whether on that ground demand is sustainable or otherwise? - HELD THAT:- It is an admitted fact that the show cause notice has demanded 10% under Rule 6(3) of Cenvat Credit Rules on the ground that appellant has availed cenvat credit on common input service which were used in the exempted and dutiable final product. However, in the adjudication order the demand of Rs, 1,20,80,589/- was confirmed on the ground that the said amount was lying in the balance as on 07.12.2008 when the appellant have opted for the exemption and according to Rule 11 (3) of Cenvat Credit Rules, 2004, as the said amount has lapsed. Thus the adjudication order has clearly travelled beyond the scope of show cause notice. It is a settled law in various judgments that when with regard to any charge/allegation the noticee is not put to notice that issue cannot be decided in the adjudication order - it is a settled law that then adjudication order cannot travel beyond the scope of show cause notice, therefore, the demand is not sustainable on the ground that the adjudication order is beyond the scope of show cause notice. Whether the demand of 10% under Rule 6 (3) of Cenvat Credit Rules in the fact that the entire credit attributed to the common input services used in the exempted goods has been reversed, is correct or otherwise? - HELD THAT:- The demand of 10% of value of exempted goods wherein the common cenvatable input services were used in the exempted as well as dutiable goods. In the present case, earlier a show cause notice dated 29.08.2013 was issued wherein the cenvat credit of Rs. 35,82,694 attributed to input and input services used in the exempted product was proposed - Since the appellant had already reversed the amount final confirmed of Rs. 9,48,034/-, accordingly, the entire cenvat credit attributed to the input and input services used in exempted goods was reversed and the same attained finality. Therefore, the entire basis for demanding 10% of the value of exempted goods under Rule 6 (3) (b) does not exist. Accordingly, the demand of 10% of the value of exempted goods which was proposed in the show cause notice is also not sustainable. Whether the demand of cenvat credit in respect of balance credit lying as on 07.12.2008 under Rule 11(3) of Cenvat Credit Rules, 2004 being lapsed is recoverable or otherwise? - HELD THAT:- The provision for lapsing of balance credit as on the date when the assessee opt for exemption is not applicable when the assessee manufacture and clear dutiable as well as exempted goods. In the present case there is no dispute that the appellant was manufacturing dutiable goods viz. other than 100% cotton as well as exempted final product (articles of 100% cotton) hence, the credit balance available as on 07.12.2008 was available for utilization for payment of duty on dutiable products - the appellant is not liable to reverse or pay back credit balance lying as on 07.12.2008. Hence, the demand on this count is also not sustainable. Whether the appellant is liable to reverse the cenvat credit on capital goods when the final product manufactured by use of such capital goods became exempted subsequently? - HELD THAT:- As per the admitted fact, before the final product became exempted, on the same capital goods the same exempted product was earlier manufactured when it was dutiable therefore, the capital goods were not used by the appellant exclusively for manufacture of exempted final product. The appellant cleared the goods under Notification No. 29/2004 before it got exempted and it was subject to duty at the rate of 4%. Therefore, the capital goods were not used exclusively for the manufacture of exempted of final product. Hence, the allegation of the show cause notice that the capital goods were used exclusively for manufacture of exempted final product is not correct. Therefore, the demand on this count is also not sustainable. The demands proposed in the show cause notice is not sustainable on multiple counts - the impugned order is set aside - Appeal allowed.
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