2009 (12) TMI 1020 - AT - Central Excise

Summary

Issues involved:
The issue involves the applicability of SSI exemption u/s Notification No. 8/2003 dated 01.03.2003 for the year 2005-06, specifically regarding the reversal of CENVAT Credit balance on inputs when opting for the exemption.

Summary:

Issue 1: Applicability of SSI exemption and reversal of CENVAT Credit balance on inputs

The respondents, engaged in manufacturing M.S. Pipes fittings, opted for SSI exemption under Notification No. 8/2003 dated 01.03.2003 for the year 2005-06. The Revenue alleged that the appellant was required to pay in cash an amount equivalent to the CENVAT Credit attributable to input, as there was a balance quantity of finished goods and materials in progress. The lower appellate authority allowed the appeal filed by the respondent, citing a previous judgment. The Revenue contended that the facts were different from the cited case and the impugned order should be set aside. However, the Advocate for the respondents referred to a Tribunal decision and a High Court ruling supporting the exemption from reversing CENVAT Credit balance when opting for SSI exemption.

Issue 2: Interpretation of Rule 9(2) of Cenvat Credit Rules

The Advocate for the respondents argued that Rule 9(2) cannot undermine the indefeasibility of Modvat Credit and that the CENVAT Credit taken on inputs should be determined and debited from the credit balance, without lapsing or recalling Modvat credit already utilized correctly. The Tribunal and the High Court rulings supported this interpretation, emphasizing that in the case of SSI exemption, there is no requirement to reverse the CENVAT Credit balance.

Judgment:

After considering the arguments from both parties, the Tribunal found that the case of the respondent was similar to the precedent set by the Punjab & Haryana High Court. The Tribunal upheld the decision that when opting for SSI exemption, the assessee is not obligated to reverse the CENVAT Credit balance. Consequently, the appeal filed by the Revenue was rejected, and the impugned order was upheld.

*(Dictated and pronounced in Court)*