2012 (9) TMI 78 - AT - Central Excise

Non-reversal of cenvat credit in respect of inputs lying in opening stock at time of switching from paying duty at concessional rate under Notification No.1/93-CE to full duty exemption under Notification No.16/97-CE w.e.f. 1.4.97 - Held that - Admittedly, appellant have not reversed the cenvat credit pertaining to inputs in stock or in process as on 31.3.1997; despite having availed the benefit of exemption notification No.16/97 from 1.4.97, which is a notification based on the value of clearances in a FY. Hence, in view of this under the provisions of sub-rule (7) of Rule 57H, at the time of opting for this exemption w.e.f. 1.4.97, the appellant were required to reverse the cenvat credit on the inputs in stock or in process or contained in the finished product lying in stock. Thus, the provisions of Rule 57H(7) are applicable to the appellant. Since the correct facts had been narrated in the SCN hence citation of Rule 57C and not Rule 57H(7), would not vitiate the SCN. Cenvat credit demand upheld. Further, in view of condition (i) of the Notification No. 16/97-CE, the option to avail of the exemption has to be made before effecting first clearances in a FY and such option once exercised, shall be final and cannot be withdrawn in the same FY under any circumstances. Therefore, their plea that if allowed to opt out of the exemption w.e.f. 1.4.97, their net duty liability would be only Rs. 1,21,712/- is without any merit - Decided against assessee

Summary

Issues:
- Availing cenvat credit on inputs used in manufacturing final products under exemption Notification No.16/97-CE.
- Denial of cenvat credit by invoking Rule 57H(7) of Central Excise Rules, 1944.
- Appellant's plea to reverse cenvat credit on inputs in stock as on 1.4.97.
- Department's contention on the applicability of Rule 57H(7) and non-reversal of cenvat credit.
- Appellant's request to opt out of exemption and its impact on cenvat credit.
- Interpretation of Notification No. 16/97-CE regarding the finality of opting for exemption.

Analysis:

1. The appellant, engaged in manufacturing electrical equipment, availed cenvat credit on inputs under an exemption Notification before switching to full duty exemption from 1.4.97. The Department issued a show cause notice for non-reversal of cenvat credit on inputs used in exempted final products, invoking Rule 57C of Central Excise Rules, 1944.

2. The appellant argued that they were not required to reverse the cenvat credit on inputs in stock as on 1.4.97, citing precedents and judgments. The Department defended the impugned order, emphasizing the applicability of Rule 57H(7) for recovering cenvat credit.

3. The Tribunal noted that the appellant did not reverse the cenvat credit despite opting for full duty exemption from 1.4.97, as required by Rule 57H(7). The correct facts in the show cause notice justified upholding the cenvat credit demand of Rs.7,36,344 against the appellant.

4. The appellant's plea to opt out of the exemption after 1.4.97 was deemed invalid as per Notification No. 16/97-CE, which mandates the finality of opting for exemption before the first clearances in a financial year. The Tribunal rejected the appellant's argument based on a similar precedent.

5. Consequently, the Tribunal dismissed the appeal, finding no merit in the appellant's contentions regarding the reversal of cenvat credit and opting out of the exemption scheme. The decision upheld the Department's position on the applicability of Rule 57H(7) and the non-reversal of cenvat credit by the appellant.