2005 (9) TMI 525 - AT - Central Excise

Issues:
1. Withdrawal of Cenvat credit facility for a specific product.
2. Interpretation of Cenvat Credit Rules and Central Excise Act regarding the eligibility of credit.
3. Application of Rule 12 of the Cenvat Credit Rules, 2002.
4. Dispute over recovery of Cenvat credit amount and imposition of interest and penalties.
5. Appeal against the Commissioner (Appeals) decision based on a Karnataka High Court judgment.
6. Comparison with the Supreme Court decision on a similar matter.

Issue 1: Withdrawal of Cenvat Credit Facility
The judgment deals with the withdrawal of the Cenvat credit facility for the product LOD under Chapter 27, sub-heading 2710.90 of the Central Excise Tariff Act, 1985, effective from 1-3-2003. This change impacted the eligibility of LDO as an input under the Cenvat Credit Rules, 2000, leading to the assessee becoming ineligible to utilize the credit from the specified date.

Issue 2: Interpretation of Cenvat Credit Rules
The judgment analyzes the definition of "input" under the Cenvat Credit Rules, 2000, highlighting the exclusion of LDO, HSD, and Motor Spirit from the definition post-amendment. It emphasizes that prior to 1-3-2003, LDO was considered a specified input if used in the manufacture of final products, but the subsequent amendment and notification led to the withdrawal of Cenvat credit facility for LDO.

Issue 3: Application of Rule 12 of Cenvat Credit Rules
The application of Rule 12 of the Cenvat Credit Rules, 2002 is crucial in this case, as it mandates the recovery of Cenvat credit amount from the assessee for the stock of LDO held on 28-2-2003, which became ineligible for credit post the withdrawal notification. The rule, read with Section 11A of the Central Excise Act, 1944, necessitated the recovery of the credit amount along with interest.

Issue 4: Dispute over Recovery and Penalties
The dispute arose from the demand for recovery of the Cenvat credit amounting to Rs. 2,75,229/- from the assessee for the stock of LDO held on the specified date, leading to the imposition of interest and penalties under Sections 11AC and 11AB, respectively, upon adjudication.

Issue 5: Appeal Against Commissioner (Appeals) Decision
The appeal challenged the Commissioner (Appeals) decision, which set aside the order based on a precedent from the Karnataka High Court in the case of M/s. Grasim Industries Ltd. v. C.B.E & C. N.D. [2004 (163) E.L.T. 10 (Kar.)]. The Department contested this decision, leading to the current appeal.

Issue 6: Comparison with Supreme Court Decision
The judgment compares the present case with the Karnataka High Court judgment, later confirmed by the Supreme Court, emphasizing that there is no merit in the demand for credit reversal once the goods were received before the issuance of the notification withdrawing the credit facility. The judgment underscores the phased manufacturing process and the impracticality of anticipating such notifications, ultimately rejecting the appeal filed by the Revenue based on the established legal precedents.

This detailed analysis of the judgment encapsulates the core issues, legal interpretations, application of rules, and the comparison with relevant judicial decisions, providing a comprehensive understanding of the case.

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