ORDER
T.K. Jayaraman, Member (T)
1. This appeal has been filed against the Order-in-Appeal No. 13/2005(H-IV)CE dated 31.01.2005 passed by the Commissioner of Customs & Central Excise (Appeals-II) Hyderabad.
2. The appellants are manufacturers of drugs. Revenue proceeded against the appellants on the ground that they had taken credit on certain inputs, which are used exclusively in the manufacture of exempted goods. The amount involved is Rs. 30,653/- for the period from 6.5.2000 to 23.09.2003. The Original Authority demanded the above mentioned sum being the credit wrongly taken for the above mentioned period. Further, he imposed a penalty equivalent to the credit wrongly taken in terms of Rule 173Q(bb) and Rule 13(2) of Cenvat Credit Rules, 2001 and 2002 read with Section 11AC of the Central Excise Act, 1944. Interest was also demanded under Rule 12 of Cenvat Credit Rules, 2001 and 2002 read with Section 11AB of the Central Excise Act, 1944. The appellants approached the Commissioner(Appeals). The Commissioner (Appeals) upheld the order of the Original Authority in the impugned order. However, he reduced the penalty to Rs. 15,000/- The appellants are strongly aggrieved over the impugned order. Hence, they have come before this Tribunal for relief.
3. Shri Harish, the learned Advocate, appeared on behalf of the appellants and Shri Anil Kumar, the learned JDR, for the Revenue.
4. We heard both sides. The learned Advocate who appeared on behalf of the appellants, brought to my notice that the issue of taking credit on inputs used exclusively in the manufacture of exempted goods was dealt with by this Bench in the party’s own case in Hetero Labs Ltd. v. CCE, Hyderabad . In the said case, the Rules were elaborately discussed and it was held that once the assessee pays 8% of the sale value of the exempted goods, then he can take credit on exclusive inputs also. It was urged that the ratio of the above case is squarely applicable to the present case also.
4.1. On a very careful consideration of the entire matter, I find that the erstwhile Rule 57C and Rule 57CC which are pari material with the present Rule 6 of the Cenvat Credit Rules 2002/2004 and these Rules have been elaborately interpreted in the above said decision of the Tribunal. On going through the relevant Rules, it was concluded that once the assessee reverses 8% of the sale value of the exempted products, then, the Cenvat Credit taken cannot be held to be illegal. In the present case also, it is seen that in respect of certain inputs, which have been exclusively used in the manufacture of exempted goods, the appellants have paid 8% of the sale value of the exempted goods. By following the ratio of the above decision, I find that there is no irregularity in the availment of the credit. In view of this legal position, I set aside the impugned Order-in-Appeal and allow the appeal of the appellant with consequential relief.
(Pronounced in open Court on 21 SEP 2007)