Avon Cycles Limited vs Commissioner Of Central Excise, Ludhiana

P. Anjani Kumar, Member (T)

The present appeal is directed against the impugned order dated 30.09.2013 passed by the Commissioner (Appeals) Central Excise, Chandigarh.

Briefly stated facts of the case are that the appellant is engaged in manufacture of electrically (battery) operated two wheeler cycle (e-bikes) and parts thereof; the e-bikes are chargeable to duty under Section 4 of the Central Excise Act, 1944 and the parts thereof are chargeable to duty under Section 4A ibid in terms of the Notification No. 49/2008-CE (NT) dated 24.12.2008 as amended; the inputs used in the manufacture of both e-bikes and parts thereof are common; the e-bikes were exempted from the whole of duty of excise vide Notification No. 25/2008-CE dated 29.04.2008; however, the e-bikes parts continued to be chargeable to duty under Section 4A ibid. Further, the packing, re-packing, labelling, re-labelling of the container etc was deemed to be manufactured under Section 2(f)(iii) of the Central Excise Act, 1944. The Revenue was of the opinion that on the date of issuance of the Notification exempting the e-bikes i.e. 25/2008-CE dated 29.04.2008, the credit lying with the appellant stood lapsed and the same was not available for utilization for payment of duty on any other final products whether cleared for home consumption or for export, or for payment of service tax on any output service provided in India or exported and therefore, the clearances affected by the assessee by debiting the amount from this lapsed credit are not in accordance with the provisions of Rule 3(4) of the Cenvat Credit Rules, 2004.; accordingly, a show cause notice dated 02.11.2010 was issued to the appellant asking to show cause as to why the central excise duty of Rs.4,89,693/- should not be recovered from them along with interest and penalty; the show cause notice was confirmed vide Order-in-Original dated 21.06.2011 and was upheld by the impugned order dated 30.09.2013. Hence, the present appeal.

3.1 Shri Sudhir Malhotra, the learned Counsel appearing on behalf of the appellant submits that the Cenvat Credit on inputs is admissible in case final products are chargeable to duty; in case final products are exempted, the Cenvat Credit on inputs thereto is not admissible; in terms of Rule 6(1) and explanation (i) & (ii) to Rule 6(3) of the Cenvat Credit Rules, 2004, the Cenvat Credit shall not be allowed on inputs used exclusively for the manufacturing of the exempted goods.

3.2 The learned Counsel further submits that the inputs used in manufacture of both the dutiable and exempted goods are common and the appellant was not maintaining separate accounts; therefore, in terms of Rule 6(3)(i) of the Cenvat Credit Rules, 2004, the appellant was paying an amount equal to 10% or 5% as the case may be on the value of exempted goods.

3.3 The learned Counsel further submits that the instant case of the appellant is covered by Rule 6(3) of the Cenvat Credit Rules, 2004 and not by the Rule 11(3) of the Cenvat Credit Rules, 2004.

3.4 The learned Counsel further submits that on the same issue, the Department had issued the show cause notices dated 27.04.2009, 27.05.2009 and 30.04.2010; all the show cause notices travelled up to the Tribunal and this bench of the Tribunal vide Final Order dated 22.07.2016 has decided the issue in favour of the appellants and therefore, in the present case also, the appeal may be allowed in favour of the appellant.

On the other hand, Shri Raman Mittal, the learned Authorized Representative for the Revenue reiterates the findings of the impugned order.

Heard both sides and perused the records of the case.

We find that the this issue is no longer res integra being decided in favour of the appellant by this Bench of the Tribunal vide the Final Order cited above where the appellant was manufacturing both exempted goods i.e. the e-bikes and dutiable goods i.e. the parts of e-bikes; it is not the case of the Department that the appellant is only manufacturing exempted goods and therefore, the contention of the appellant that they are following the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004 is acceptable.

We do not find applicability of Rule 11(3) of the Cenvat Credit Rules, 2004 in the instant case. We find that this bench of the Tribunal vide Final Order dated 22.07.2016 has held as under:

“10. We do agree with the observations made by the ld. Commissioner (appeals) and hold that as assessee was not maintaining separate account for inputs used in manufacturing of e-bikes and parts thereof, therefore, provisions of Rule 6(3) are squarely applicable to the assessee as the assessee are manufacturing both dutiable and exempted final product and assessee is liable to pay 10% of the value of e-bikes at the time of their clearance and the Cenvat Credit lying in their Cenvat account shall not lapse wholly but the Cenvat Credit lying in their Cenvat account attributable to inputs, work in progress and finished e-bikes shall lapse. As we hold that the provisions of Rule 6(3) are applicable to the facts of the present case. Therefore, we hold that provisions of Rule 11(3) of the Cenvat Credit Rules are not applicable to the facts of the present case.”

In view of the ratio of the decision cited above, we are of the considered opinion that the impugned order is not sustainable and requires to be set aside and we do so.

The appeal is accordingly allowed.