2004 (7) TMI 214 - AT - Central Excise

Summary

Issues: Interpretation of Rule 6 of Cenvat Credit Rules, 2001; Applicability of unjust enrichment

In this case, the appeal was directed against the Commissioner (Appeals) order, where it was agreed that the respondents could claim full credit for fuel used in manufacturing steam, part of which was cleared outside the factory without being used for final goods. The issue involved the interpretation of Rule 6 of Cenvat Credit Rules, 2001. The Revenue challenged the order, arguing that the claim was based on a Tribunal judgment and raised concerns about unjust enrichment. The Commissioner's order did not address the unjust enrichment issue, despite accepting the claim on merit. The appeal challenged the order on both grounds.

The respondents claimed refund based on Tribunal judgments related to Central Excise Rules, arguing that Rule 6 is similar to other rules cited in the judgments. The respondents also referred to other Tribunal decisions supporting their position. The co-ordinate benches in previous decisions held that the requirement of payment equivalent to 8% does not apply due to the exclusion of fuels in Rule 6(2) of Cenvat Credit Rules, 2001.

The Tribunal analyzed Rule 6, which prohibits Cenvat credit on inputs used in manufacturing exempted goods unless specified in sub-rule (2). The respondents argued that they reversed the duty credit on fuel used in generating steam cleared outside the factory, not the 8% amount. The Tribunal concluded that Rule 6(1) applied to the fuel used in manufacturing exempted goods, and sub-rule (2) did not exempt fuels from this provision. Therefore, the reversal of credit on fuel was correct, and no refund was warranted.

Ultimately, the Revenue appeal was allowed, setting aside the Commissioner (Appeals) order. The Tribunal held that the reversal of Modvat credit on fuel used as inputs was correctly done by the respondents as per Rule 6(1), and there was no basis for a refund.