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2015 (10) TMI 420 - CESTAT NEW DELHI

2015 (10) TMI 420 - CESTAT NEW DELHI - TMI - Availment of CENVAT Credit - Non maintenance of separate account - Exemption under Notification No.4/06-CE dt.1.3.06 - Held that:- In terms of sub-rule (2) of Rule 6, Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or exempted services, then, the manufac .....

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on which no service tax is payable. - in course of manufacture of MS Ingots, slag dust arises as an inevitable by-product and in the present case, even if manufacturer, in accordance with the provisions of Rule 6 (2) wants to maintain separate account or inventory of inputs/input services used in the manufacture of dutiable products MS ingots and take credit only in respect of inputs and input services used in the manufacture of MS ingots, this is impossible as slag emergesd as an inevitable and .....

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and the provisions of sub-rule (3) would not be applicable in the cases where the sub-rule (2) is inapplicable. - same view has been taken by Hon'ble High Court of Gujarat in the case of CCE, Ahmadabad-III vs. Nirma., (2012 (10) TMI 138 - GUJARAT HIGH COURT) by Bombay High Court in the case of Rallis India Ltd.(2008 (12) TMI 46 - HIGH COURT of BOMBAY)the Apex court in the case of Hindustan Zinc Ltd.(2014 (5) TMI 253 - SUPREME COURT) The appellant thus have a strong prima facie case in their favo .....

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iron. In the course of manufacture of M.S.Ingots, slag dust is generated as by-products which is fully exempt from duty under Notification No.4/06-CE dt.1.3.06 and accordingly slag dust was cleared at nil rate of duty. The period of dispute in this case is from 2009-10 to 2011-12. The appellant were availing cenvat credit of duty paid on sponge iron and other inputs/input service. The department was of the view that since the appellant were using common inputs in relation to manufacture of duti .....

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,770/- against the appellant under Rule 6(3) (i) of Cenvat Credit Rules, 2004 read with Rule 14 and section 11A alongwith interest on it under section 11AB of Central Excise Act, 1944 and besides this, imposed penalty of equal amount on the appellant under Rule 15 of Cenvat Credit Rules, 2004 read with section 11AC. On appeal being filed to the Commissioner (Appeals) against this order of the Deputy Commissioner, the Commissioner (Appeals) while upholding the order of the Deputy Commissioner hel .....

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cturer wants to maintain separate account of inputs meant for manufacture of dutiable and exempted final products, it is impossible to maintain such separate account and, therefore, the provisions of Rule 6(3) would not be applicable, that he relies upon the judgement of Hon'ble Bombay High Court in the case of Rallis India Ltd. vs. Union of India-2009 (233) ELT 301 (Bom) wherein in the background of similar facts involving an identical issue, it has been held that provision of rule 57CC wou .....

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price of the exempted by-product, that the Apex Court in the case of Hindustan Zinc Ltd. vs. Union of India-2014 (303) ELT 321 (SC) has held that when in the course of manufacture zinc or copper during calcinations of ore concentrates, sulphuric acid emerged as inevitable technical necessity, the provisions of Rule 57CC would not be applicable and the amount of 8% of sale price of exempted sulphuric acid cleared to fertilizer plants would not be payable, that the ratio of these judgements is sq .....

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ated as 'exempted goods' in terms of definition of this term in Rule 2(d) of Cenvat Credit Rules, 2004 and since common cenvat credit availed have been used in relation to the manufacture of dutiable and exempted final product and since the provisions of sub-rule (2) of Rule 6 had not been complied with, the provisions of Rule 6(3) would become applicable and therefore, the provisions of Rule 6(3) (i) of Cenvat Credit Rules have been correctly invoked. He, therefore, pleaded that there i .....

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l products and since the appellant have not complied with the provisions of sub-rule (2) of Rule 6, the provisions of sub-rule (3) of Rule 6 of Cenvat Credit Rules, 2004 would be applicable and invoking clause (i) of Rule 6(3), an amount of 5% of the total sale value of the slag dust cleared at nil rate of duty has been demanded. 6. In terms of sub-rule (2) of Rule 6, Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufac .....

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take credit only on that quantity of inputs/input services which is intended for use in the manufacture of dutiable final product or providing output service on which no service tax is payable. According to the sub-rule (3) of Rule 6, notwithstanding anything contained in sub-rules (1) and (2), the manufacturer or the provider of output service, opting not to maintain separate accounts, shall follow options as specified in this sub-rule. One of the options available to the person under sub-rule .....

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dust arises as an inevitable by-product and in the present case, even if manufacturer, in accordance with the provisions of Rule 6 (2) wants to maintain separate account or inventory of inputs/input services used in the manufacture of dutiable products MS ingots and take credit only in respect of inputs and input services used in the manufacture of MS ingots, this is impossible as slag emergesd as an inevitable and unavoidable by-product. Separate account and inventory as per the provisions of .....

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