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2014 (10) TMI 804 - CESTAT NEW DELHICENVAT Credit - reversal of credit when final product become exempt after taking cenvat credit - Rule 6 (1) as well as Rule 11 (3) (ii) of the Cenvat Credit Rules, 2004 - Held that:- sub-Rule would be applicable only in the case when there is only one final product being made from one or more cenvated inputs and that final product has become exempt from duty or if there are more than one final products being made out of one or more cenvated inputs, all the final products have become exempt from duty at the same time. This Rule would not be applicable if more than one final products are being manufactured out of one or more final product and out of them only some have become fully exempt but other final products have remained dutiable. In our view, in such a situation, it would be incorrect to apply this sub-Rule and prohibit the utilization of the Cenvat credit available as on the date of the exemption for payment of the duty on the dutiable final products, as in terms of Rule 3 (4) of the Cenvat Credit Rules, 2004, the Cenvat credit can be utilized for payment of any duty of excise on any final product. Needless to say, various Rules of the Cenvat Credit Rules, 2004, have to be read harmoniously and, therefore, Rule 11 (3) cannot be given an interpretation which is in-conflict with the provisions of Rule 3 (4). From a perusal of Rule 11 (3) as well as 11 (2) it is clear that these two sub-Rules of Rule 11 are also in accordance with the general principles of the Cenvat credit that no Cenvat credit would be admissible in respect of inputs or input services which have been used in or in relation to manufacture of the exempted final products. As observed by the Apex court in its judgment in the case of CCE, Vadodara vs. Gujarat Narmada Fertlisers Co. Ltd. (2009 (8) TMI 15 - SUPREME COURT) mentioned above, this principle is inbuilt in the very structure of the Cenvat credit scheme and Rule 6 (1) and Rule 6 (2) also merely reiterate and highlight this principle. Therefore, no Cenvat credit would be admissible in respect of any inputs which have been used in or in relation to manufacture of final product. While the provisions of Rule 11 (3) (ii) of the Cenvat Credit Rules, 2004 are not applicable, the availability of the Cenvat credit in respect of the inputs lying in stock and in process as on 01/03/08 would be subject to the provisions of Rule 6 and the Cenvat credit would be admissible only to the extent these inputs were used in or in relation to manufacture of dutiable final product and would not be admissible in respect of the quantity of the inputs which were used in the manufacture of exempted final products. Accordingly, in respect of clearance of exempted final products, an amount equal to the Cenvat credit involved on the inputs used in the manufacture of those final products shall be payable. - Matter remanded back - Decided in favour of assessee.
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