2015 (6) TMI 700 - AT - Central Excise

Benefit of Cenvat credit - whether the appellant is liable to reverse the Cenvat credit of ₹ 61,000/- approx. which has been used by them for payment of duty in respect of goods produced and cleared by them on 4th and 5th May, 2007 which was not in any case payable by them, Cenvat credit of ₹ 61,000/- was be available to them if they are liable to pay duty - Held that - The same was reversed by paying duty liability on the goods which were not required to pay any duty. As such by using the said credit for payment of duty, they are deemed to have reversed the same, thus making the entire situation as revenue neutral. As such, I find no justification for confirmation of demand on such denial of credit. Accordingly, the impugned order is set aside

Summary

Issues:
1. Liability to reverse Cenvat credit used for payment of duty on exempted goods.

Analysis:
The appellants, engaged in manufacturing edible biscuits, utilized Cenvat credit for duty payment on their final products before realizing the goods became exempted from duty on 3-5-2007. The dispute revolves around the reversal of Cenvat credit amounting to approximately &8377; 61,000 used for duty payment on goods cleared on 4th and 5th May, 2007, which were exempt from duty. The Revenue objected to the use of Cenvat credit and directed the reversal of the balance. However, the tribunal held that by using the credit for duty payment on goods not liable for duty, the appellants effectively reversed the credit, resulting in a revenue-neutral situation. The judgment emphasized that since the duty was not payable, there was no justification for confirming the demand for reversing the credit. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellants, providing them with consequential relief.

This case highlights the importance of awareness regarding changes in duty exemptions and the implications on utilizing Cenvat credit for duty payment. The tribunal's decision focused on the concept of revenue neutrality in the context of Cenvat credit utilization for duty payment on goods that later became exempt from duty. The judgment clarified that the act of using the credit for duty payment on goods not subject to duty effectively amounted to reversing the credit, thereby maintaining a revenue-neutral stance. The ruling underscores the significance of considering the specific circumstances of duty liability and credit utilization to determine the appropriate course of action in such situations.

In conclusion, the judgment by the Appellate Tribunal CESTAT NEW DELHI addressed the dispute regarding the liability to reverse Cenvat credit used for duty payment on goods that became exempt from duty. The tribunal's decision centered on the concept of revenue neutrality, emphasizing that utilizing the credit for duty payment on non-taxable goods effectively reversed the credit, leading to a balanced revenue outcome. By setting aside the demand for credit reversal, the tribunal provided relief to the appellants, highlighting the importance of considering duty liability and credit utilization in line with applicable regulations to maintain a fair and just outcome in such cases.