2013 (9) TMI 1088 - AT - Central Excise

Summary

Issues involved: Interpretation of Notification No. 3/2001 and 6/2002, reversal of credit u/r 6(3)(d), entitlement to exemption, verification of credit reversal, interest liability, penalty imposition.

Interpretation of Notification: The appellant, engaged in manufacturing motor vehicles, availed credit on common inputs used for both duty paid and exempted clearances. The Revenue contended that availing credit on common inputs violated the conditions of the notification, leading to initiation of proceedings.

Reversal of Credit u/r 6(3)(d): The appellant reversed 8% of the value of exempted goods as per Rule 6(3)(d). During adjudication, they debited the total credit availed in respect of inputs used in manufacturing exempted final products, amounting to Rs. 11,61,409, to comply with the notification conditions.

Entitlement to Exemption: The key issue was whether the reversal of credit, either by payment of 8% u/r 6 or debiting from the Cenvat credit account, satisfied the notification condition of not availing credit on inputs used in manufacturing exempted goods. Citing legal precedents, it was established that when credit availed is subsequently reversed, it is deemed as if no credit was ever taken, fulfilling the notification requirement.

Verification and Interest Liability: The Tribunal directed the adjudicating authority to verify if the appellant had reversed the entire proportionate credit in respect of inputs used for exempted goods. The authority was also tasked with deciding the interest liability on the credit availed and subsequently reversed.

Penalty Imposition: It was concluded that since the exemption was deemed admissible to the appellant, no penalty needed to be imposed.

Conclusion: The appeal was disposed of with directions for verification and determination of interest liability, while ruling out the imposition of penalty due to the admissibility of the exemption.