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2015 (8) TMI 249 - MADRAS HIGH COURT

2015 (8) TMI 249 - MADRAS HIGH COURT - 2015 (323) E.L.T. 323 (Mad.) - Reversal of CENVAT Credit - Credit on common inputs - Non maintenance of separate accounts - Procedure under Rule 57CC (9) is not complied with - Whether the Tribunal is justified in allowing the appeal when Rule 57CC (1) of Central Excise Rules, 1944 is straight away attracted and when sub-rule (9) is not complied with - Held that:- For claiming the benefit under Section 57CC (9) of the Act, the manufacturer has to maintain s .....

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the President. However, in the present case, even as per the show cause notice and the order of adjudication, it is clear that the input credit has been reversed by the respondent/assessee even prior to the amendment. In such view of the matter, the Tribunal, following the decision of the Allahabad High Court in Hello Mineral Water case (2004 (7) TMI 98 - HIGH COURT OF JUDICATURE AT ALLAHABAD), which followed the decision of the Apex Court in Chandrapur Magnet Wires case (1995 (12) TMI 72 - SUPR .....

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e admitting the appeal, framed the following substantial question of law for consideration : - "Whether the Tribunal is justified in allowing the appeal when Rule 57CC (1) of Central Excise Rules, 1944 is straight away attracted and when sub-rule (9) is not complied with?" 2. The facts, in a nutshell, are as hereunder : - The respondent is a manufacturer of aerated water drinks and fruit juice based drinks and is subjected to 'Nil' rate of duty under Chapter 22 of the Central E .....

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er with effect from 1.9.1996. 3. With regard to the common inputs, viz., activated carbon, filter paper and caustic soda, the respondent took cenvat credit only for the month of September, 1996, to the extent of ₹ 33,050/= which was subsequently reversed on 17.10.96 and this fact is not disputed. The respondent did not avail any cenvat credit after September, 1996 on all the aforementioned common inputs. 4. In respect of furnace oil used for generation of electricity, the following pro rat .....

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hich fact is also not in dispute. 6. It is the case of the department that the respondent had used the common cenvat credit availed inputs in the manufacture of dutiable aerated water and duty exempted slice, but did not follow the procedure contemplated under Rule 57CC (9) by maintaining separate inventory and accounts in the receipt and use of inputs, viz., filter paper, activated carbon, caustic soda, industrial washing products and sugar. Further, in respect of furnace oil used as fuel, the .....

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manufacture of dutiable as well as exempted goods and, therefore, no demand should be made. However, the said submission was rejected by the adjudicating authority, who in his original order of adjudication, confirmed the demand of duty at 8% of the value of clearance. Against the said adjudication order, the assessee preferred appeal before the Commissioner (Appeals), who dismissed the appeal. 8. On further appeal before the Tribunal, the Tribunal reversed the order of the Commissioner (Appeals .....

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ng for the respondent/assessee and perused the materials available on record as also the decisions relied on by the learned counsel on either side. 10. When the matter was taken up, it is brought to the notice of this Court that by Finance Act, 2010, an amendment was made to Rule 6 under Section 73 of the Finance Act, 2010, which came into operation with retrospective effect from September, 2004. Sub-rule (6) to Rule 6 was introduced therein, which provided as hereunder : - S. No. Provisions of .....

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on to exempted final products relating to the period beginning on the 10th day of September, 2004 and ending with the 31st day of March, 2008 (both days inclusive) is pending on the date on which the Finance Bill, 2010 receives the assent of the President, then, notwithstanding anything contained in sub-rules (1) and (2), and clauses (a) and (b) of sub-rule (3), a manufacturer availing Cenvat credit in respect of any inputs or input services and manufacturing final products which are chargeable .....

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e 5th day of the month following the month in which goods have been cleared from the factory. 10th day of September, 2004 to the 31st day of March, 2008 (both days inclusive). 11. Rule 57CC, on which reliance is placed by the learned counsel for the appellant, was introduced with effect from 01.09.1996. As per the said provision, where a manufacturer is engaged in the manufacture of any final product, which is chargeable to duty as well as in any other final product, which is exempt from the who .....

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as well as in any other final product, which is exempt from the whole of the duty of excise leviable thereon, or is chargeable to nil rate of duty, if the manufacturer takes credit of the inputs used in manufacture of both exempted and dutiable final products, in the absence of the manufacturer maintaining separate books of accounts as required under sub-rule (9) of Rule 57CC, the manufacturer is liable to pay 8% of the price of exempted products. 13. For claiming the benefit under Section 57CC .....

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hich the Finance Bill, 2010 received the assent of the President. However, in the present case, even as per the show cause notice and the order of adjudication, it is clear that the input credit has been reversed by the respondent/assessee even prior to the amendment. In such view of the matter, the Tribunal, following the decision of the Allahabad High Court in Hello Mineral Water case (supra), which followed the decision of the Apex Court in Chandrapur Magnet Wires case (supra) rightly set asi .....

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es, 2004 to be amended Amendment Period of effect of amendment 1 2 3 4 Rule 6 of the Cenvat Credit Rules, 2004 as published vide Notification Number G.S.R. 600 (E), dated the 10th September, 2004 [23/2004- CENTRAL EXCISE (N.T.), dated the 10th September, 2004]. In the Cenvat Credit Rules, 2004, in Rule 6, after subrule (6), the following subrule shall be inserted, namely : "(7) Where a dispute relating to adjustment of credit on inputs or input services used in or in relation to exempted fi .....

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