2019 (12) TMI 1328 - AT - Central Excise

Reversal of CENVAT Credit - not availing benefit of exemption - absolute exemption or conditional exemption - reversal sought on the ground that the said amount was utilized for payment of duty on excisable goods - benefit of N/N. 30/2004-CE. - HELD THAT - The adjudicating authority has ordered for reversal of the accumulated credit on the ground that the appellant was availing the exemption notification No. 30/2004-CE, therefore, required to reverse the credit in terms of Rule 11(3)(ii) - it is found that such condition for reversal is only in respect of the exemption notification, which is absolute exemption, whereas, in the present case notification No. 30/2004-CE contained condition of non availment of Cenvat Credit in respect of input, input service and capital goods, therefore, the exemption is not absolute exemption. Hence, as per rule 11 of Cenvat Credit is not required to be reversed. On the identical issue this Tribunal in the case of M/S PATODIA FILAMENTS PVT. LTD., SHIVKARAN CHOUDHARY VERSUS C.C.E. S.T., -VAPI (VICE-VERSA) 2019 (4) TMI 435 - CESTAT AHMEDABAD has held that the Cenvat Credit was held to be admissible and the same was not required to be reversed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Reversal of Cenvat Credit under exemption notification No. 30/2004-CE.
2. Interpretation of Rule 11(3)(ii) of Cenvat Credit Rules, 2004.
3. Applicability of absolute exemption and conditional exemption under notification No. 30/2004-CE.
4. Comparison with previous Tribunal decisions on similar issues.
5. Decision on admissibility of Cenvat Credit and reversal requirement.

Analysis:
The case involved a dispute regarding the reversal of Cenvat Credit accumulated by the appellants upon availing exemption under notification No. 30/2004-CE. The adjudicating authority had ordered the reversal of the entire accumulated credit amount, including the amount utilized for payment of duty on excisable goods. The appellant challenged this order, arguing that the exemption did not necessitate the reversal of Cenvat Credit as per Rule 11(3)(ii) of the Cenvat Credit Rules, 2004.

Upon review, the Tribunal noted that the condition for reversal of Cenvat Credit applies only to absolute exemptions, whereas the exemption under notification No. 30/2004-CE was conditional, requiring non-availment of Cenvat Credit for inputs, input services, and capital goods. Citing Rule 11 of the Cenvat Credit Rules, the Tribunal concluded that the appellant was not obligated to reverse the accumulated credit as the exemption was not absolute.

The Tribunal referenced a previous decision involving a similar issue and highlighted that the notification in question was conditional, thereby necessitating compliance with Rule 11(3)(i) instead of (ii). The Tribunal emphasized that the appellant had followed all conditions under Rule 11(3)(i) and was not required to reverse the entire credit balance upon opting for the exemption. The Tribunal also cited other cases where credits were allowed to manufacturers facing similar issues, supporting the admissibility of the Cenvat Credit.

Based on the precedent set by previous Tribunal decisions and the interpretation of the relevant rules, the Tribunal allowed the appeals filed by the appellants, providing consequential reliefs. The Tribunal dismissed the Revenue's appeal due to the amount involved being less than a specified threshold in accordance with the Government's litigation policy instruction. Ultimately, the Tribunal set aside the impugned order and allowed the appeal, affirming the admissibility of the Cenvat Credit and rejecting the requirement for its reversal in this case.