TMI Blog2013 (2) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... under Rule 6(3)(a) that the manufacturer had to pay a flat rate of duty. In all cases falling under Rule 6(3)(a) the only requirement was that the manufacturer should pay an amount equivalent to Cenvat Credit attributable to inputs used in the manufacture of such exempted final product The exempt product manufactured by the assessee fell in sub-clause (vi) of Rule 6(3)(a). The assessee was therefore entitled to avail Cenvat Credit on the duty paid on the final product as long as in respect of inputs used in manufacturing of exempt goods, he followed the procedure laid down in Rule 6(3)(a). The contention of the Revenue that such reversal of the credit must happen before utilisation of inputs in the manufacture of exempt goods, would not stand in view of the retrospective amendment in Rule 6, which, as noted above, by virtue of introduction of sub-rule (7) permitted the assessee to pay the Cenvat Credit at the time of or even after clearance of the goods. In favour of assessee - TAX APPEAL No. 834 of 2010 - - - Dated:- 26-9-2012 - MR. AKIL KURESHI AND MS. HARSHA DEVANI JJ. Appearance: Mr Varun K Patel for the Appellant Mr Anand P Nainawati with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it on the inputs used in manufacturing of final product, which is exempt from payment of duty. According to the Department, unless and until the respondent maintains separate accounts for dutiable as well as exempt products, it was not possible for the assessee to claim Cenvat Credit even for the duty paid on final product. On such basis, show-cause notice came to be issued by the Adjudicating Officer calling upon the assessee why central excise duty with interest not be recovered and penalties be not imposed. Despite opposition from the assessee, Commissioner of Excise passed his Order in Original dated 20th January 2009 and confirmed the duty demand with interest as well as imposed penalties. The assessee carried the matter in appeal before the Tribunal. The Tribunal, by the impugned judgment, reversed the decision of the Commissioner in its brief order dated 21st August 2009, the relevant portion of which reads thus: 2. The major dispute relates to the above two notifications. The benefit of Notification No.30/2004-CE stands denied by the Commissioner and duty of ₹ 1,44,87,970/- (Rupees one crore forty four lakh eighty seven thousand nine hundred and seve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puts used for manufacture of exempt final product before clearance and in that view of the matter the benefit could not be denied to it. An issue similar to the present one had come before this Court in the case of Ashima Dyecot Ltd. (supra). The Division Bench of this Court relying on the decision of the Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. v. Collector, 1996 (81) ELT 3 (SC) held that reversal of Cenvat Credit would amount to payment of duty. The Court also upheld the assessee's contention that due to hardship it was not possible to maintain separate accounts and merely on such grounds denial of exemption would not be justified. Mr Varun Patel, counsel for the revenue, however, vehemently contended that: (i) The decision of this Court was based on the consideration that it was not possible for the assessee in that case to maintain separate accounts. No such case is pleaded in the present case. (ii) In absence of maintenance of separate accounts it would not be possible for the Department to ascertain the assessee's contention the proportion in which it has used the inputs for manufacturing of exempt as well as dutiable goods. (iii) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 12B of the Central Excise Rules, 2002 on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. (2) Where a manufacture avails of CENVAT credit in respect of any inputs, except inputs intended to be used as fuel and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. (3) The manufacturer, opting not to maintain separate accounts shall follow either of the following conditions, as applicable to him, namely:- (a) if the exempted goods are -- (i) goods falling within the heading No.22.04 of the First Schedule to the Tariff Act; (ii) Low Sulphur Heavy Stock (LSHS) falling within Chapter 27 of the said First Schedule used in the generation of electricity; (iii) Naptha (RN) falling within Chapter 27 of the said First Schedule used in the manufacture of fertilizer; (iv) xxxx ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory amendments. Upon perusal of Rule 6, as it stood at the relevant time, it emerges that as per sub-rule (1) the manufacturer of exempt goods would not be entitled to Cenvat Credit on the inputs used in manufacturing such exempt product. As per sub-rule (2) where a manufacturer utilises the inputs for manufacturing final product, which are chargeable to duty as well as exempt goods, he is required to maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of inputs which is intended for use in the manufacture of dutiable goods. Sub-rule (3) of Rule 6, however, gives an option to the manufacturer not to maintain separate accounts under certain circumstances. Clause (a) thereof provided that if the exempt goods are falling under any of the clauses of the goods specified in sub-clauses (i) to (viii) then, the manufacturer would pay an amount equivalent to the CENVAT credit attributable to the inputs used in or in relation to the manufacture of such final products at the time of their clearance from the factory. Under clause (b) of sub-rule (3) of Rule 6 it wa ..... 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