2015 (8) TMI 1315 - AT - Central Excise

Cenvat demand - glass bottles of Aerated water - breakage during the handling in the factory premises of the appellant - period involved is May to June, 2005 and March to June, 2006 - Held that - during the relevant time, there were no provisions contained in the above Cenvat Credit Rules requiring the manufacturer to reverse the cenvat credit taken on the inputs destroyed in the factory. The provision for reversal of cenvat credit came into effect from 07.09.2007 through insertion of sub-rule (5C) into Rule 3 in the Cenvat Credit Rules. Since the said rule has not been given the retrospective effect, I am of the opinion that in the absence of any specific provisions at the material time to which the present dispute relates, there was no requirement of reversal of cenvat credit. I find support from the judgment of Hon ble Allahabad High Court in the case of Commissioner of Central Excise vs. M. Kumar Udhyog (P) Ltd. 2014 (7) TMI 832 - ALLAHABAD HIGH COURT wherein, it has been held that when the period involved prior to introduction of sub-rule (5C) into Rule 3 of Cenvat Credit Rules, 2004, the Department cannot insist for reversal of cenvat credit on the inputs destroyed within the factory. - Decided in favour of appelant

Summary

Issues involved:
- Appeal against the confirmation of cenvat demand on glass bottles
- Interpretation of provisions for reversal of cenvat credit
- Applicability of rules at the relevant time

Analysis:
The case involved an appeal against the confirmation of cenvat demand on glass bottles by the Commissioner (Appeals). The appellant, engaged in the manufacture of Aerated Water, filed a remission application for Central Excise Duty on glass bottles broken during handling. The Assistant Commissioner granted the remission but imposed a condition to reverse the cenvat credit taken on the bottles. The appellant appealed the decision, arguing that at the relevant time, there were no provisions for reversing cenvat credit in such cases. The appellant relied on a judgment to support this claim. On the other hand, the respondent cited a circular to justify the reversal of cenvat credit in case of input destruction before use in manufacturing.

The Tribunal considered the period in question, May to June 2005 and March to June 2006, and noted that there were no provisions in the Cenvat Credit Rules at that time mandating the reversal of cenvat credit on destroyed inputs. The provision for such reversal came into effect later, on 07.09.2007. Since this rule was not retrospective, the Tribunal held that there was no requirement to reverse cenvat credit during the relevant period. The Tribunal referenced a judgment by the Allahabad High Court to support this interpretation, stating that the Department cannot insist on credit reversal for destroyed inputs before the introduction of the relevant rule. Consequently, the impugned order confirming the cenvat demand was set aside, and the appeal was allowed in favor of the appellant.