2004 (11) TMI 482 - AT - Central Excise

Summary

Issues:
Entitlement to utilize Modvat credit earned before enforcement of new Cenvat Credit Rules, 2002.

Analysis:

Issue 1: Entitlement to utilize Modvat credit earned before enforcement of new Cenvat Credit Rules, 2002.
The appeal raised the question of whether the appellants were entitled to utilize the Modvat credit accumulated by them prior to the enforcement of the new Cenvat Credit Rules, 2002. The appellants had accumulated Cenvat credit under the Cenvat Credit Rules, 2001, and the dispute arose regarding the utilization of this credit under the new rules. The adjudicating authority denied the utilization of the credit citing Rules 6 and 9 of the new Cenvat Credit Rules, 2002, which specifically addressed units manufacturing both dutiable and non-dutiable products. The appellant argued that Rule 9 of the Rules, 2002 allowed for the utilization of previously earned credit, and Rule 6 did not restrict this right. Reference was made to the case law of K.M. Sugar Mills Ltd. v. CCE, Allahabad [2001 (133) E.L.T. 567].

Analysis of Judgment:
Upon examination of the record, it was established that the appellants had accumulated Cenvat credit before the enforcement of the new Cenvat Credit Rules, 2002. Rule 9 of the Cenvat Credit Rules, 2002 permitted the utilization of previously earned credit by a manufacturer under the earlier Cenvat Credit Rules, 2001. Rule 3(3) of the Rules, 2002 also allowed for the utilization of Modvat credit for payment of excise duty on final products or inputs. The argument put forth by the Revenue, based on Rules 6 and 3 of the Rules, 2002, was countered by the fact that these rules did not restrict the utilization of accumulated credit but rather focused on the availability of credit under the new rules for manufacturers engaged in exempted goods production. The judgment emphasized that the right to claim utilization of previously earned credit was saved by the provisions of Section 38-A of the Act, ensuring that the appellants could utilize the Modvat credit for discharging duty on dutiable products.

Conclusion:
The Tribunal ruled in favor of the appellants, setting aside the impugned order that disallowed the utilization of the Modvat credit. The judgment allowed the appeal of the appellants, granting them consequential relief in accordance with the law.