2008 (1) TMI 309 - AT - Central Excise

Whether the credit is required to be reversed in respect of inputs contained in the finished goods lying in stock on the date of the respondent s opting for exemption - held that credit is not required to be reversed credit having been taken and benefit will be available to the manufacturer without any limitation of time - after insertion of sub-rule (3) of Rule 11 CCR assessee is required to pay the amount equivalent to the Credit in such cases - appeal filed by the revenue is rejected

Summary

Issues:
1. Reversal of credit for inputs in finished goods upon opting for exemption.

Analysis:
The main issue in this case revolved around whether the credit needed to be reversed for inputs contained in finished goods when the manufacturer opts for exemption. The Revenue argued that as per the decision in the case of CCE Rajkot v. Ashok Iron & Steel Fabricators, all credit should be reversed in such situations. On the other hand, the Advocate for the Respondent relied on sub-rule (3) of Rule 11 of Cenvat Credit Rules, 2004, inserted by Notification No. 10/2007, which required payment equivalent to the Cenvat credit on inputs if exemption was opted. The Advocate also cited various Tribunal decisions favoring the assessee post the insertion of this rule.

The Tribunal examined the legal provisions and precedents to reach a decision. It noted that sub-rule (3) of Rule 11 mandated the reversal of credit on inputs used in final products if exemption was chosen, as per Notification No. 10/2007. The Revenue contended that this rule was inserted to settle the controversy and the assessee must reverse the credit accordingly, citing the decision in Tractors & Farm Equipments Ltd. case. However, the Tribunal referred to the judgment in the case of Ashok Iron & Steel Fabricators where it was held that credit need not be reversed upon subsequent exemption from duty, especially when the benefit was available without any time limitation. The Tribunal also considered the series of decisions favoring the assessee post the insertion of sub-rule (3) of Rule 11, emphasizing the requirement to pay the equivalent amount of Cenvat credit on inputs upon opting for exemption.

Ultimately, the Tribunal found no reason to interfere with the Commissioner (Appeals) order, rejecting the appeal filed by the Revenue. This decision was based on the interpretation of the relevant rules and precedents, particularly emphasizing the impact of the insertion of sub-rule (3) of Rule 11 on the requirement to reverse credit in cases of exemption.

This detailed analysis highlights the interpretation of legal provisions, precedents, and the specific rule changes that influenced the decision in this case regarding the reversal of credit for inputs in finished goods upon opting for exemption.