2024 (1) TMI 1372 - HC - Central Excise

Reversal of CENVAT Credit - Rule 6(3)(b) of the Cenvat Credit Rules 2004 - whether the Tribunal was justified in setting aside the order passed by the Commissioner of Customs and Central Excise Hyderabad I Commissionerate when the respondent-assessee failed to pay the amount @ 10% on the value of the exempted final product in terms of Rule 6(3)(b) of the Cenvat Credit Rules 2004? - HELD THAT - There does not seem to be any conflict or dispute so far as Notification No.6/2003-CE dated 01.03.2003 prescribing the products shown in the table which is reproduced in the preceding paragraph falling under the exempted category from payment of excise duty w.e.f. 01.03.2003. To add with it the rate of tariff as is reflected at Serial No.47 which again is reproduced in the preceding paragraph would reflect that the rate of tariffs to be collected is shown as nil . This substantiates the fact that these goods are one which stand exempted from payment of central excise tariff. Once when there is a specific notification exempting payment of central excise tariff on certain specified items both in the form of bulk drugs and also in the form of formulations where in the course of manufacturing formulations bulk drugs becomes the raw material and the same would stand exempted from payment of central excise tariff. Thus no strong case has been made out by the appellant calling for interference - appeal dismissed.

Summary

Issues:
- Appeal under Section 35(G) of the Central Excise Act, 1944 against Final Order No.432/2009
- Justification of setting aside the order passed by the Commissioner of Customs and Central Excise
- Interpretation of Rule 6(3)(b) of the Cenvat Credit Rules, 2004
- Availing Cenvat credit on exempted final products
- Classification of bulk drugs and formulations
- Allegation of availing credit on inputs used in manufacturing exempted products
- Application of Rule 6(3)(b) in the case
- Comparison with Texmo Industries case
- Exemption notification for certain bulk drugs and formulations
- Interpretation of Notification No.6/2003-CE

Detailed Analysis:
The judgment involves an appeal under Section 35(G) of the Central Excise Act, 1944 challenging the Final Order No.432/2009 passed by the Customs, Excise and Service Tax Appellate Tribunal. The issue revolves around the Tribunal setting aside the order passed by the Commissioner of Customs and Central Excise, Hyderabad I Commissionerate, concerning the payment of 10% amount on the value of exempted final products under Rule 6(3)(b) of the Cenvat Credit Rules, 2004. The appellant contends that the Tribunal erred in relying on a previous case, Texmo Industries, arguing that the facts of the present case are different and Rule 6(3)(b) should be strictly followed.

The case involves the manufacturing of bulk drugs and formulations by the respondent, with certain products exempted from central excise duty. The appellant alleged that the respondent availed credit on inputs used in manufacturing both dutiable and exempted products, leading to a demand for payment under Rule 6(3)(b). The respondent argued that the bulk drugs and formulations are interconnected in the production process, with bulk drugs serving as intermediates for formulations, which are the final products. The respondent relied on an exemption notification for certain bulk drugs and formulations to support their position.

The judgment delves into the classification of bulk drugs and formulations, emphasizing that the exempted products fall under specific tariff items exempt from excise duty. The Tribunal's decision is supported by the exemption notification and the interconnected nature of bulk drugs and formulations in the manufacturing process. The judgment distinguishes the present case from previous decisions, highlighting the specific exemption for the products in question. Ultimately, the Court dismisses the appeal, finding no strong grounds for interference with the Tribunal's decision, and upholds the Final Order setting aside the Commissioner's order.