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TMI Blog2025 (1) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise duty, and were, therefore cleared without payment of Central Excise duty. The appellant is also engaged in the manufacture of leather articles such as footwear, clothes, etc., falling under Chapter 42 of the CETA, which were cleared upon payment of Central Excise duty. 3. The appellant had cleared 70% of the exempted final product, i.e. finished leather, without payment of duty, while the remaining 30% finished leather was captively consumed by appellant in the manufacture of dutiable final product, i.e. leather articles, cleared upon payment of duty. 4. The appellant had prepared a chemical known as 'season' in the pigment room located within its factory premises. The primary use of 'season' is to provide finishing touch to the finished leather, so that leather is at par with the requirement of customers. For preparing 'season' appellant mixed binders, pigments, dyes, oil fats, waxes, preservatives, etc. in a plastic drum along with water and hand stirred with the help of wooden stick. The 'season' so prepared is taken to finished leather section where it is sprayed through pump on leather to give desired colour as per the customers requirement and to protect the leather i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Government, being satisfied that it is necessary in the public interest so to do, hereby exempts- (i) Capital goods as defined in the Cenvat Credit Rules, 2002 manufactured in the factory and used within the factory of production; (ii) Goods specific in column (1) of the Table hereto annexed (hereinafter referred to as 'inputs') manufactured in a factory and used within the factory of production in or in relation to the manufacture of final products specified in column (2) of the said Table; From the whole of the duty o excise leviable thereon which is specified in the Schedules to the Central Excise Tariff Act, 1985 (5 of 1986) or additional duty of excise leviable thereon, which is specified in the Schedule to the said Special Importance Act: Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of the duty of excise or additional duty of excise leviable thereon or are chargeable to nil rate of duty, other than those goods which are cleared,- (i) To a unit in a Free Trade Zone, or (ii) To a hundred per cent Export Oriented Undertaking, or (iii) To a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds both dutiable and exempted. From the contents of the notification we also find that the intermediary product 'season' prepared in the factory of the appellant is covered under Column (1) of the Table and is used in or in relation to the manufacture of both types of final products covered under Column (2) of the Table of the notification. It is also an undisputed position that the appellant had not availed the Cenvat Credit of duty or tax paid on any inputs or input services or capital goods which were used in the manufacture of both exempted and dutiable goods. The fact that the appellant has not availed the Cenvat Credit shows that they had discharged the obligation as prescribed under Rule 6 of the Rules. The provisions of Rule 6 are quoted herein below: "RULE 6. [Obligation of a manufacturer or producer of final products and a [provider of output service]]. - [(1) The CENVAT credit shall not be allowed on such quantity of input as is used in or in relation to the manufacture of exempted goods or for provision of exempted services or input service as is used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at the intermediary stage in the production of 'cement', which is exempted from the excise duty under the exemption notification no. 50/2003 dated 10.06.2003. The Apex Court, inter-alia observed as under: "16. This Rule is not applicable as such in its totality since taking of Cenvat Credit is not in issue in these cases. On the other hand, relevance of this Rule is only to the extent of 'obligation' contained in the said Rule which is to be discharged. A plain reading of clause (vi) of the notification would show that it only contemplates a situation where 'a manufacturer manufactures both dutiable as well as exempt final products.' There may be different final products manufactured by the same manufacturer. The final products may be made out of the same product or out of different products. Clause (vi) does not contemplates that the manufacturer should manufacture only 'one final product' or that if he manufacturers only one product that product itself should be both dutiable and exempted. The basis adopted by the CESTAT that the same final product should be partly dutiable and partly exempt, is neither a requirement of clause (vi) nor a requirement of Rule 6." 12. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 67/95-C.E., dated 16-3-1995 in respect of their intermediate product i.e. packing boxes. The impugned order is set aside. The appeals are allowed." 13. Similar observations have been made in Spray King Agro (Supra) that exemption under notification is available to the intermediary goods even if the final product is exempted, provided the assessee discharges the obligation prescribed under Rule 6 of the CCR, 2001. In the context, it was observed that the appellant during the impugned period was not registered with the Central Excise Department, hence, has not availed the Cenvat Credit in respect of any of the inputs used either in the final product or in the intermediate product i.e. Brass and therefore, the condition of sub-rule (1) of Rule 6 stands complied with. 14. In view of the various case laws interpreting notification as well as the provisions of Rule 6 of CCR, 2001, it is a settled position that since the appellant herein had not availed the Cenvat Credit, they had discharged the obligation under Rule 6(1) and were therefore, entitled to the benefit of the exemption notification no. 67/1995. 15. Having held the issue on merits on the entitlement of the exemption no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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