2015 (10) TMI 1234 - AT - Central Excise

Reversal of Modvat credit - benefit of exemption Notification No. 29/2004-CE dated 09.7.2004 as well as Notification No. 30/2004-CE dated 09.7.2004 - Held that - Supreme Court upheld the decision of Hon ble Gujarat High Court 2008 (9) TMI 87 - HIGH COURT GUJARAT and reported at 2009 (3) TMI 975 - SUPREME COURT it has been held that the reversal of credit would amount to non-availment of credit under Notification No. 30/2004-CE. So we do not find any reason to interfere the order of the Commissioner (Appeals) - Decided against Revenue.

Summary

Issues involved: Appeal against Commissioner (Appeals) order setting aside adjudication order regarding availing exemption under Notification No. 29/2004-CE and Notification No. 30/2004-CE, reversal of input credit, permissibility of credit reversal, applicability of Rule 6(3) of Cenvat Credit Rules, 2004, judicial precedents on reversal of credit and benefit of exemption.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner (Appeals) where the adjudication order was set aside. The respondents were engaged in the manufacture of Processed Fabrics and availed the benefit of exemption under Notification No. 29/2004-CE and Notification No. 30/2004-CE. The issue arose when the Respondents reversed the proportionate input credit for basic excise duty and education cess under Notification No. 30/2004-CE. The demand was raised on the grounds that availing credit initially and reversing it subsequently was impermissible.

2. The Tribunal referred to the decision of the Hon'ble Gujarat High Court in the case of CCE vs. Ashima Dyecot Limited, where it was held that reversal of credit amounts to non-availment of credit under an exemption notification. The Tribunal also cited the decision of the Hon'ble Supreme Court upholding the Gujarat High Court's decision. The Supreme Court held that reversal of credit would indeed amount to non-availment of credit under Notification No. 30/2004-CE. Therefore, the Tribunal found no reason to interfere with the order of the Commissioner (Appeals) and rejected the appeal filed by the Revenue.

3. The Tribunal's decision was based on the interpretation of Rule 6(3) of the Cenvat Credit Rules, 2004, which provides conditions for manufacturers opting not to maintain separate accounts. The Tribunal also considered judicial precedents, such as the Allahabad High Court's ruling in the case of Hello Minerals Water (P) Ltd. v. Union of India, which supported the view that reversal of credit should not disqualify the assessee from the benefits of an exemption notification on final products.

4. In conclusion, the Tribunal's decision was in line with established legal principles and judicial precedents, affirming that the reversal of credit would result in the non-availment of credit under the relevant exemption notification. The appeal filed by the Revenue was therefore rejected, upholding the order of the Commissioner (Appeals) in favor of the Respondents.