2026-VIL-991-CESTAT-DEL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Lapsing of CENVAT credit balance under Rule 11(3) of CENVAT Credit Rules, 2004 – Respondent-assessee produced both dutiable and exempted final products from common inputs and had a credit balance as on the date when one product became exempted - Whether the CENVAT credit balance lying as on the date of exemption lapses under Rule 11(3) of the CENVAT Credit Rules, 2004 when more than one final product is manufactured from common inputs and only some products become exempted while others remain dutiable – HELD - The Rule 11(3) applies only when all final products manufactured from the credited inputs become fully exempted from duty. When multiple final products are manufactured from common credited inputs and some become exempted while others remain dutiable, Rule 11(3) does not apply because the credit can still be utilized for payment of duty on the dutiable products in terms of Rule 3(4) of the CENVAT Credit Rules, 2004. The Rule 3(4) of the CCR, 2004 provides that CENVAT credit may be utilised for payment of any duty of excise product. This means that if out of the same CENVAT credit availed inputs, more than one final product is manufactured and out of those final products, one is exempted from duty, CENVAT credit can be utilised for payment of duty for the other final products which are dutiable - The credit balance does not lapse merely because one product becomes exempted. Thus, the CENVAT credit balance as on 01.03.2008 shall not lapse under Rule 11(3) of the CCR, 2004. The Principal Commissioner did not commit any illegality in dropping the demand - The demand for recovery of credit balance as on the exemption date is not sustainable. The Revenue appeal is dismissedrnrn^Recovery of amount equal to percentage of value of exempted goods cleared for domestic market under Rule 6(3) of CENVAT Credit Rules, 2004 - Whether the department can demand recovery of an amount equal to ten percent to five percent of the value of exempted final products cleared for domestic consumption under Rule 6(3) of CENVAT Credit Rules, 2004 when the manufacturer has not exercised such an option and has maintained separate accounts without wrongly availing credit on inputs used for exempted goods – HELD – The Rule 6(3) merely offers options to manufacturers who do not maintain separate accounts for inputs used in manufacture of dutiable and exempted goods. When a manufacturer maintains proper separate accounts and has not taken credit on inputs used for exempted goods, the Department cannot demand the percentage amount under Rule 6(3) as the manufacturer has not exercised any such option. The statutory scheme does not vest the department with power to choose an option on behalf of the manufacturer - Further, the Department's acceptance in permitting re-credit of amounts mistakenly paid for a few months estops it from contending that an option was exercised for the entire year. Merely depositing the percentage amount out of abundance of caution for certain months cannot be construed as exercise of an option binding for the entire financial year - The demand for recovery under Rule 6(3) for domestic clearances is not sustainable.rnrn^Recovery of CENVAT credit for inputs used in manufacture of exempted goods exported under bond under Rule 6(3) of CENVAT Credit Rules, 2004 - Whether the department can demand recovery of CENVAT credit or amount equal to percentage of value of exempted final products that have been exported under bond when such exports were properly authorized and Rule 6(6)(v) of CENVAT Credit Rules, 2004 provides exemption from the bar on credit for exported goods – HELD - The Rule 6(6)(v) of the CCR, 2004 creates an exemption from the bar on CENVAT credit imposed by Rule 6(1) to 6(4) specifically in respect of excisable goods removed without payment of duty for export under bond. The non-allowability of input credit under Rules 6(1) to 6(4) applies only when inputs used in manufacture of exempted final products are cleared for home consumption, not when exempted final products are cleared for export under bond – Further, the SCN failed to allege that specific notifications prohibited export of exempted goods under bond, making it improper to raise this contention in appeal. All exports were properly authorized through ARE certificates countersigned by proper officers and accepted by the department without challenge. The Department's acceptance in approving exports under bond precludes it from subsequently demanding credit reversal - The demand for recovery of credit for exempted goods exported under bond is set aside.
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