2012 (10) TMI 693 - AT - Central Excise

Reversal of the cenvat credit on inputs manufacture of paper and paper board - Prior to April, 2009, the appellant was clearing their final products i.e. papers on payment of full rate of duty, after availing the benefit of Modvat credit of duty, paid on the inputs and capital goods - w.e.f. 1-4-2009, they opted for a Notification No. 4/2006 Held that - On opting for exemption, in terms of a notification issued under Section 5A of the fact as an assessee is under a legal obligation to pay an amount equivalent to the Cenvat credit availed in respect of the inputs, if such inputs are lying in stock as on the date of opting for exemption - against assesee - directed to make pre deposit.

Summary

Issues:
1. Dispute regarding Modvat credit utilization by the appellant.
2. Interpretation of Rule 11(3)(i) and Rule 11(3)(ii) of Cenvat Credit Rules.
3. Legal obligation of paying back Cenvat credit on opting for exemption.
4. Applicability of the rules to service tax credit reversal.
5. Direction for deposit and waiver of balance amount of duty and penalty.

Issue 1: Dispute regarding Modvat credit utilization
The appellant, engaged in paper manufacturing, availed Modvat credit until June 15, 2009, for clearing final products without duty payment. Upon reverting to normal duty rates, the appellant used the credit for duty payment from June 2009 onwards. The dispute arose when the credit was sought to be denied based on Rule 11 of Cenvat Credit Rules, which required repayment of credit upon opting for an exemption notification.

Issue 2: Interpretation of Rule 11(3)(i) and Rule 11(3)(ii)
The Tribunal analyzed Rule 11(3)(i) and Rule 11(3)(ii) to determine the denial of credit. The appellant argued that the Commissioner's reliance on sub-rule (ii) was incorrect, contending that both sub-rules apply to distinct situations. However, the adjudicating authority considered both sub-rules applicable to the same scenario, necessitating satisfaction of both.

Issue 3: Legal obligation of paying back Cenvat credit
The Tribunal found that Rule 11(3)(i) covered the situation adequately. When opting for exemption under Section 5A, the appellant was obligated to repay the Modvat credit equivalent to inputs in stock. The Tribunal rejected the appellant's claim to re-avail the credit post-exemption since the inputs were utilized during the exemption period, rendering them unavailable upon returning to normal duty rates.

Issue 4: Applicability of rules to service tax credit reversal
The Tribunal clarified that the rules focused on reversing Modvat credit for inputs in stock and did not pertain to service tax credit reversal. Acknowledging the appellant's financial condition, the Tribunal directed a deposit of Rs. 1 Crore within 12 weeks, waiving the balance duty amount and penalty during the appeal's pendency.

Issue 5: Direction for deposit and waiver
In light of the circumstances and the appellant's financial state, the Tribunal ordered a deposit of Rs. 1 Crore within 12 weeks, leading to the waiver of the remaining duty and penalty amounts during the appeal process.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, New Delhi highlights the key issues, interpretations of relevant rules, legal obligations, and the direction provided regarding deposit and waiver of amounts, ensuring a comprehensive understanding of the case.