2010 (12) TMI 318 - AT - Central Excise

Concessional rate of duty - concessional rate of duty subject to the condition that no credit has been taken under the provisions of CENVAT Credit Rules 2002 - appellants had originally availed the MODVAT Credit - appellant have subsequently reversed the credit - appellant having reversed the major part of the credit and having offered to reverse the balance credit entitled to benefit of Notification No.30/94

Summary

Issues:
Interpretation of Notification No.29/2004-CE and No.30/2004-CE regarding concessional duty rates and credit availing conditions.

Analysis:
The appellants were engaged in manufacturing fabrics and were benefiting from exemptions under Notification No.29/2004-CE and No.30/2004-CE. The key issue was whether the subsequent reversal of credit for clearances under Notification No.30/2004-CE fulfilled the notification's conditions. The adjudicating authority had rejected the reversal, leading to a demand for duty, interest, and penalties.

The Tribunal referred to the Supreme Court's judgment in M/s Chandrapur Magnet (Wires) Pvt. Ltd case, where reversal of credit was deemed equivalent to not availing credit, satisfying the notification's condition. However, the Commissioner argued that the reversal in this case occurred after goods clearance, unlike the Chandrapur case, which was before clearance, thus not acceptable.

The Tribunal clarified that the Chandrapur case did not specify the timing of reversal concerning goods removal. It noted the Tribunal's decision in M/s Ashima Dyecot Ltd., upheld by the Gujarat High Court and Supreme Court, where even post-clearance reversals were deemed compliant. The High Court of Gujarat also approved the Tribunal's approach in M/s Maize Products case, where credit reversal at the appeal stage was accepted.

Additionally, the High Court of Allahabad in M/s Hello Minerals Water (P) Ltd. Vs. UoI case emphasized that reversal of credit, even at the Tribunal stage, should not disentitle the benefit of an exemption notification. The timing of credit reversal was deemed immaterial, and the appellant, having reversed most credit and offered to reverse the rest, was entitled to the notification's benefits.

Conclusively, the Tribunal set aside the impugned order, allowing the appeal with consequential relief for the appellant, emphasizing that the reversal of credit, even post-clearance, should not impact the entitlement to exemption benefits as per the law's interpretation provided in relevant judgments.