2007 (6) TMI 132 - AT - Central Excise

Cenvat/Modvat The appellant reversed the credit on the part of the goods before their clearance which carrying nil rate of duty The demand on the ground of mis-utilisation of credit and non maintainable of separate account not sustained as per the order of tribunal

Summary

Issues:
1. Mis-utilization of Cenvat credit in availing exempted final product.
2. Failure to maintain separate accounts.
3. Reversal of credit before clearance of exempted final product.
4. Applicability of Notification No. 29/2004-C.E. and 30/2004-C.E.
5. Interpretation of Rule 6(3) of the Cenvat Credit Rules.

Analysis:
1. The appeal involved allegations of mis-utilization of Cenvat credit by the appellants in availing exempted final products without maintaining separate accounts. The Commissioner confirmed demands despite the appellants reversing the credit as required by Rule 6(3) of the Cenvat Credit Rules.

2. The issue of mis-utilization was challenged by the appellants, arguing that duty was discharged on dutiable goods and credit was reversed for goods with NIL rate of duty. They contended that demanding duty would lead to double jeopardy as credit had been reversed. The Revenue did not seek 8% of the value of final goods but focused on mis-utilization.

3. The learned Consultant cited precedents, including a ruling by the Chennai bench, to support the appellants' position that once credit is reversed before clearance of exempted final products, the charge of mis-utilization does not apply. The Tribunal found that the appellants had indeed reversed credit for clearances with NIL rate of duty, even though separate accounts were not maintained.

4. The Tribunal examined the impugned order and found that the issue was not about charging 8% of the final goods' value but about mis-utilization of credit. Citing previous judgments, including one by the same bench in a similar case, the Tribunal noted that once credit is reversed, the question of mis-utilization does not arise.

5. The Tribunal referred to various decisions, including the Apex Court's ruling in Chandrapur Magnet Wires case, to support the appellants' position. It was emphasized that reversal of credit before goods removal satisfies conditions of notifications, and the requirement of separate accounts must be read in the context of Rule 6. The Tribunal set aside the impugned order, allowing the appeal with consequential relief.

6. The Tribunal further addressed the JCDR's points by referring to judgments from the Allahabad High Court and Tribunal rulings, highlighting the correct interpretation of Rule 6(3)(vi) and the appellants' compliance with the rules. The impugned order was deemed without merit and set aside, with the appeal allowed along with any consequential relief.

In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellants based on the reversal of credit before the clearance of exempted final products and the correct application of relevant notifications and rules.