2019 (7) TMI 1583 - HC - Central Excise

Interpretation of Statute - Rule 11(1) of the Cenvat Credit Rules 2004 - lapse of CENVAT Credit - HELD THAT - The goods are conditionally exempt as is evident from S.No.10 of the notification no.30/2004. As the goods are not absolutely exempt and the exemption is granted only on fulfillment of certain conditions clearly Rule 11(3) (i) of the Rules of 2004 would apply - In the present case as well the exemption is not absolute but conditional upon fulfillment of certain stipulations. The assessee was entitled to the benefit of Rule 11(3)(i) of the Rules of 2004. The Court is therefore of the opinion that no substantial question of law arises in this appeal - Appeal dismissed.

Summary

Issues involved:
Interpretation of Rule 11(1) of the Cenvat Credit Rules, 2004 regarding lapsed Cenvat Credit due to duty exemption under notification No.30/2004.

Detailed Analysis:
1. The issue in this case revolves around the interpretation of Rule 11(1) of the Cenvat Credit Rules, 2004, specifically in the context of lapsed Cenvat Credit due to duty exemption under notification No.30/2004. The appellant resisted a show cause notice invoking Rule 11(3) based on the duty exemption, leading to the lapse of Cenvat Credit. The CESTAT relied on a previous order and highlighted the conditional nature of the exemption under the notification, stating that Rule 11(3)(i) would apply in such cases where the exemption is not absolute but contingent upon certain conditions being met.

2. The CESTAT's decision was based on the understanding that in cases where the exemption is conditional, as seen in the present situation under S.No.10 of notification no.30/2004, Rule 11(3)(i) of the Rules of 2004 would be applicable. This rule mandates the payment of an amount equivalent to the CENVAT credit if the manufacturer opts for exemption under a notification issued under section 5A of the Act. Since the exemption in this case was not absolute but subject to fulfillment of specific conditions, the assessee was entitled to the benefit of Rule 11(3)(i) of the Rules of 2004.

3. The Court, after considering the facts and legal provisions, concluded that no substantial question of law arose in the appeal. The Court upheld the decision that in cases where the exemption is conditional, Rule 11(3)(i) would be the applicable provision, and therefore, dismissed the appeal. This judgment clarifies the application of Rule 11(1) in situations where Cenvat Credit lapses due to conditional duty exemptions, providing guidance for similar cases in the future.