By CA Puloma Dalal, CA Jayesh Gogri,CA Mandar Telang, Chartered Accountants
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Rule 6(3)(b) of CENVAT Credit Rules is not applicable if there is no levy of duty on goods cleared on account of absence of manufacture. Hence, where assessee availed the entire CENVAT credit and paid 8% at the time of clearance of such goods, the procedure was held to be in contravention of the law. However, demand is reduced to the extent of amount of 8% already paid by way of utilizing CENVAT credit.
Facts:
The appellant a manufacturer of wires falling under chapter 72 and 85 of the first Schedule to the Central Excise Tariff Act registered with the Central Excise and cleared final product on payment of duty after availing Cenvat Credit of duty paid on inputs. The appellant was also doing galvanization on H B wire procured from other manufacturers. Since the process did not amount to manufacture there was no duty incidence on such product. For the period under consideration, the appellants availed cenvat credit on the entire common inputs used in the manufacture of dutiable products as also the products which did not attract duty. Such non-dutiable products were being cleared by them on payment of 8% of the value of the same in terms of provisions of Rule 6(3)(b) of Cenvat Credit Rules. Revenue, denied the CENVAT credit on the ground that, in as much as the appellants final product i.e. galvanized wire and the other wires which emerges by the process of wire drawing are not process amounting to manufacture and hence not liable to excise duty, the provisions of Rule 6(3) (b) of Cenvat Credit Rules is not applicable to them. Appellant contended that, the fact that the said goods are specified in the schedule to the Central Excise Tariff, they are required to be held as excisable goods, and although emerging as a result of non-manufacturing activity, the provisions of Rule 6(3)(b) would fully apply.
Held:
Tribunal observed that, said goods are admittedly specified in the tariff and in terms of Rule 2(d) and hence they have to be held excisable goods. The same attract duty at the rate of 16% ad valoram and there is no exemption notification in respect of said goods. It was further observed that admittedly, the said product did not attract duty at all on account of being a non-manufactured product. It was observed that on one hand, the appellant is taking a stand that no duty is required to be paid on the galvanized wire inasmuch as there was no manufacturing activity involved and thus reason that he is not paying full rate of duty of 16% on the said goods at the time of clearance of the same and on the other he is claiming the applicability of Rule 6(3)(b) on the ground that said goods are dutiable but exempted. Referring to the definition of “exempted goods” under rule 2(d) of Central Excise Rules, Tribunal held that if no duty of excise is leviable on account of non-manufacture, the question of exemption of same does not arise. As such, goods cannot held to be exempted goods, thus making the applicability of Rule 6(3)(b) as nil. It further held that, Rule 3 of Central Credit Rules allows a manufacturer or producer of final product to avail the credit of duty paid on the inputs, which are to be used by them in the manufacture of final product. If there is no manufacturing activity involved, the said Rule debars the availment of credit at the ab initio stage itself. It was however held that the Appellant has already reversed 8% of the cenvat credit for the purpose of payment of 8% of duty and hence to that extent payable duty demand has to be neutralized against the same.
