2006 (6) TMI 451 - AT - Central Excise

Summary

Issues:
1. Availing of Cenvat credit of Additional Excise Duty (AED) on cotton yarn.
2. Exemption of cotton yarn from payment of AED.
3. Lapsing of AED credit on a specific date.
4. Eligibility for utilizing credit if exemption is lifted in the future.
5. Dispute regarding the analogy drawn by the Commissioner.
6. Stay of recovery during the pendency of the appeal.

Analysis:
1. The appellants were availing Cenvat credit of Additional Excise Duty (AED) on their input, cotton yarn, prior to 9-7-04. However, Notification No. 31/2004-C.E. dated 9-7-2004 exempted cotton yarn from payment of AED, leading to the assessee not being entitled to utilize the credit post that date.

2. The lower authority determined that the credit of AED lapsed on 9-7-2004 as per Rule 11(2) of Cenvat Credit Rules, 2004. The issue at hand was whether the credit could be retained by the assessee despite the exemption, with the possibility of being able to use it if the exemption was lifted in the future.

3. The Tribunal acknowledged that the assessee could not utilize the AED credit from 9-7-04 due to the exemption. However, it was recognized that if the exemption was revoked at a later date, the assessee would regain eligibility to use the credit. The Tribunal noted that the appellant was hopeful for such an outcome and argued that the credit should not lapse permanently.

4. The Tribunal highlighted the appellant's contention that the analogy made by the Commissioner between the AED credit and a credit on input in stock on the date of Small Scale Industries (SSI) exemption was flawed. The Tribunal agreed with the appellant's position and allowed the credit to remain in the relevant account without prejudice to the Revenue during the appeal process.

5. Ultimately, the Tribunal decided to grant a stay of recovery as requested by the appellant, indicating that the credit in question could be preserved pending the resolution of the appeal. This decision was based on the understanding that the credit might become usable again if the circumstances changed in the future, emphasizing the importance of maintaining the credit without immediate forfeiture.

In conclusion, the Tribunal's judgment addressed the complexities surrounding the lapsing of AED credit due to an exemption, the potential reinstatement of eligibility if the exemption was lifted, and the need to differentiate between various types of credits in similar situations. The decision to allow the credit to remain during the appeal process demonstrated a balanced approach to safeguarding the appellant's rights while ensuring compliance with the relevant rules and regulations.