Order date – 26 August 2022

Facts – 

• The appellant, MAHALAXMI EXTRUSION, engaged in the manufacturing of Brass Rods classifiable under chapter 74 and was registered with Central Excise Department.
• During the course of statutory audit by the officers of the CERA it was observed that the appellant is engaged in the below activities which are exempted: 

(1) Manufacture of goods on job work basis 

(2) Trading of Goods on High Seas Basis 

(3) Trading of Goods by way of removal of input as such on payment of duty 

• Department’s contention is that all the said three activities falls under the category of exempted service. Hence, the appellant are required to pay an amount of 7% in terms of Rules 6 of Cenvat Credit Rules, 2004, on the ground that the appellant is using common input service attributed to all the activities.
• Therefore, the appellant filed the appeal.

Issue – 

• Whether the activities in which the appellant is engaged falls under the category of exempted service therefore liable to pay an amount of 7% in terms of Rules 6 of Cenvat Credit Rules, 2004?

Order – 

• Tribunal observed that in terms of Rule 3 of Cenvat Credit Rules, 2004, it is specifically provided that input and input service used in the manufacture of job work goods under Notification No. 214/86-CE, the credit is admissible. Therefore, the demand related to manufacture of job work goods is clearly not sustainable. The same view was taken in Sterlite Industries Ltd. and Svizera Labs Pvt Ltd. 
• It was also observed that in respect to the issue of High Sea Sales that appellant complying with the direction of CERA Audit, they have reversed the proportionate common credit of Rs. 5,857/- attributable to Trading of Goods on High Seas. Further, the activity of Trading of Goods on High Seas Basis was clearly in the knowledge of the department. Therefore, no suppression of fact can be alleged against the appellant. Hence, the demand is also not sustainable on the ground of time bar.
• The issue regarding trading of goods by way of removal of input as such, it was held since the input was cleared as such on payment of duty, it cannot be said that the Trading of said input is exempted activity. Therefore, Rule 6 of Cenvat Credit Rules would not be applicable. Same view was taken in the case of Mahesh Twisto Tech Ltd.
• Therefore the order was set aside and appeal was allowed.