CESTAT | R. 6(3) of CCR, 2004 applicable only to manufacturers who manufacture two classes of the goods i.e. non-exempted and exempted goods; Tribunal allows appeal sets aside interest and penalty

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): Rachna Gupta (Judicial Member) allowed an appeal which was filed against the rejection of appeal in regard to interest and penalty matter under Rule 6 (3) of Cenvat Credit Rules.

Appellant was engaged in manufacture of PP woven fabrics and were also the recipient of few services as that of Goods Transport Agency Service, Manpower Recruitment Agency Service and Legal Consultancy Service etc. During the course of audit Department noticed that appellant had cleared empty polythene bags of raw-material, empty drum of power oil worth Rs.33,62,307/- in the name of waste sales without payment of duty, despite that the goods so cleared were non-excisable.

The appellant was required to reverse the amount at the rate of 6% of the value of goods so cleared alongwith applicable interest and penalty relying upon the notification which said that any non-excisable goods cleared from the factory will be treated as exempted goods and Cenvat Credit will be reversed on the same as per Rule 6 (3) of Cenvat Credit Rules.

The Tribunal after hearing the Departmental Representative and perusing the grounds of appeal observed that the main issue was whether Rule 6(3) of CCR, 2004 was applicable to the given facts and circumstances. The Tribunal came to a conclusion that Rule 6(3) was applicable only to the manufacturers that too those who manufacture two classes of the goods i.e. non-exempted and exempted goods. Apparently and admittedly the appellant herein was manufacturing only one kind of goods which was PP woven fabric. The Tribunal observed that irrespective, exempted goods include non-excisable goods in view of the amendment in terms of Notification No. 6 of 2015 dated 01-03-2015 unless and until such exempted goods were manufactured that too alongwith the non-exempted goods by the assessee, applicability of Rule 6 does not at all arise. The Tribunal further relied on the case of the Supreme Court in Union of India v. DSCL Sugar Ltd., 2015 (322) ELT 769 (S.C.) where it was held that the products which do not quality the definition of manufacture in Section 2 (f) of Central Excise Act, there cannot be any excise duty for such products.

The Tribunal while allowing the appeal held that said Rule had wrongly been invoked in case of the appellant for demanding the reversal of Cenvat Credit availed by him at the rate of 6% of the value of empty packets of raw-material and empty drums of the oils used by the appellant in manufacture of PP woven fabric when cleared for consideration.[Sundaram Packaging (India) (P) Ltd. v. Commr. Of Customs & CGST, 2021 SCC OnLine CESTAT 169, decided on 01-04-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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