2011 (3) TMI 649 - HC - Central Excise

Demand - Notification No. 6/2002-C.E. dated 1-3-2002 - Reversal of cenvat credit after utilizing the same for clearance of ceramic tiles - Ignorance of law - Held that the order in original of Commissioner and that of CESTAT where it has not sustained order of Commissioner for the reasons to be followed here-in-after this Court is of the opinion that with no question of law having arisen in this case coupled with the fact that there being no perversity at all in the order passed by the CESTAT this appeal does not require to be allowed High Court in case of the Commissioner of Central Excise v. Ashima Dyecot Ltd. reported in (2008 -TMI - 31832 - HIGH COURT GUJARAT) wherein it is held that reversal of credit even if it is subsequent to clearance or even after credit taken would amount to non-availment of credit - Appeal is dismissed

Summary

Issues:
1. Eligibility to claim benefit of Notification No. 6/2002-C.E.
2. Acceptance of reversal of CENVAT credit after contravention of Act and Rules.
3. Entitlement to exemption from full duty after reversal of entry.

Eligibility to claim benefit of Notification No. 6/2002-C.E.:
The appellant contested the respondent's eligibility to claim benefits under Notification No. 6/2002-C.E. despite violating mandatory conditions. The respondent, a manufacturer of ceramic glazed tiles, had availed concessional duty rates under the notification. However, the department argued that as the respondent had already taken credit of duty paid on inputs, the concessional rates were not applicable. The Commissioner and CESTAT upheld the demand against the respondent, leading to the current appeal.

Acceptance of reversal of CENVAT credit after contravention of Act and Rules:
The department raised concerns over the reversal of CENVAT credit by the respondent after contravening the Act and Rules. Despite the reversal before the show cause notice, the department argued that the intentional act of availing benefits not meant for them should be scrutinized. However, the Court found no perversity in the CESTAT's decision and deemed the appeal unnecessary.

Entitlement to exemption from full duty after reversal of entry:
The issue centered on whether the respondent, by reversing the entry after being caught, could be exempt from paying full duty despite not being entitled to the exemption at the time of goods clearance. The Commissioner disallowed the claim, citing deliberate enrichment to defeat revenue. However, CESTAT, relying on a Gujarat High Court judgment, held that reversal of credit, even post-clearance, amounted to non-availment of credit, thus entitling the manufacturer to exemption benefits.

In conclusion, the Court upheld the CESTAT's decision, emphasizing that the respondent's reversal of CENVAT credit before the show cause notice entitled them to the exemption benefits. With no substantial legal questions arising, the department's appeal was dismissed, affirming the CESTAT's ruling in favor of the respondent.