2013 (9) TMI 279 - AT - Central Excise

Availing Cenvat Credit of duty paid inputs, semi-processed inputs and inputs contained in the final products lying in the stock after withdrawal of exemption - earlier assessee was availing benefit of Notification No. 10/2002-C.E and paying Central Excise duty @ 4% on the value of their final product without availing benefit of Cenvat credit Held that - vide Notification No. 10/2003-C.E., dated 1-3-2003 the above referred exemption in the form of reduction in excise duty to the extent of 4% was partially taken away by increasing the rate of the excise duty payable from 4% to 8% ad valorem and the condition of non-availament of Cenvat credit by the assessee was done away with. Cumulative reading of the above referred two notifications clearly indicate that w.e.f. 1-3-2003 the exemption from excise duty on its final product available to the appellant prior to 1-3-2003 was partially withdrawn to the extent of 4% ad valorem by increasing the excise duty from 4% to 8%. Thus, in our view to that extent the final product of the appellant cease to be exempted from excise duty. Even as per Rule 3(1) of the Cenvat Credit Rules, 2002 the appellant is entitled to Cenvat credit on the inputs in question which were either available in stock or in process or were contained in the final product lying in stock as on 1-3-2003. Thus, viewing the problem from any angle the appellant is entitled to claim Cenvat credit under Rule 3 of the Cenvat Credit Rules, 2002. Decided in favor of assesse.

Summary

Issues:
Appeal against order-in-appeal dismissing appeals against Cenvat credit demand confirmation.

Analysis:
1. Facts and Background: The appellant, engaged in manufacturing IV Cannule, availed Cenvat credit till 28-2-2003 under Notification No. 10/2002-C.E. @ 4% duty without credit. The benefit was withdrawn from 1-3-2003 via Notification No. 10/2003-C.E.

2. Cenvat Credit Disallowance: The Department alleged the appellant wrongly availed Cenvat credit on unused stock as per Rule 3(2) of Cenvat Credit Rules, 2002. Show cause notices were issued demanding Rs. 13,59,728/- and Rs. 3,04,478/- along with interest and penalties.

3. Orders and Appeals: The Additional Commissioner confirmed the demands and imposed penalties. Appeals were filed against the orders-in-original before the Commissioner (Appeals) who dismissed the appeals, leading to the current appeals.

4. Appellant's Argument: The appellant contended that denial of Cenvat credit was incorrect as per Rule 3(2) of Cenvat Credit Rules, 2002. The appellant argued that the inputs were duty paid and eligible for credit under Rule 3(1) as well. The appellant was entitled to credit on inputs lying in stock as on 1-3-2003.

5. Revenue's Argument: The Revenue supported the impugned order, stating that the inputs did not relate to goods that ceased to be exempted or non-excisable, justifying the denial of Cenvat credit under Rule 3(2).

6. Judgment: The Tribunal disagreed with the lower authorities, finding that the final product ceased to be exempted from excise duty w.e.f. 1-3-2003 due to changes in the exemption notification. Rule 3(2) allowed credit when goods became excisable, which applied in this case. Additionally, Rule 3(1) entitled the appellant to credit on inputs used in manufacturing the final product.

7. Conclusion: The appeals were accepted, setting aside the order denying Cenvat credit. The Tribunal held that the appellant was eligible for credit under Rule 3(1) and Rule 3(2) of the Cenvat Credit Rules, 2002, based on the changes in the exemption notification and duty payment on inputs.