2007 (11) TMI 48 - AT - Central Excise

Benefit of Exemption Not. 30/04 cannot be denied to appellants on the ground that credit of duty paid on inputs has been taken, if appellants have reversed the credit at the time of clearance - Once the credit taken on inputs had been reversed it could be said that no such credit had been availed

Summary

Issues:
1. Entitlement to benefit of Notification No. 30/2004-C.E.
2. Interpretation of Rule 6(3)(a) of the CENVAT Credit Rules, 2004.
3. Reversal of CENVAT credit on inputs for exempted final products.
4. Application of penalty under Rule 25 of the Central Excise Rules, 2002.
5. Comparison with relevant case laws.
6. Strict construction of exemption Notification.

Analysis:

1. Entitlement to benefit of Notification No. 30/2004-C.E.:
The main issue in this case was whether the appellants were entitled to the benefit of Notification No. 30/2004-C.E. despite availing CENVAT credit on inputs used in the manufacture of final products cleared without payment of duty. The Tribunal referred to previous cases where the benefit of similar notifications was allowed when the credit initially availed on inputs was reversed at the time of clearance of the final product. Based on this, the Tribunal held that the appellants were entitled to the benefit of the notification in question.

2. Interpretation of Rule 6(3)(a) of the CENVAT Credit Rules, 2004:
The appellants argued that under Rule 6(3)(a), they had the option not to maintain separate accounts for inputs used in the manufacture of dutiable and exempted final products. The Tribunal considered this argument but ultimately relied on previous case law and held that the appellants were eligible for the exemption despite availing CENVAT credit on inputs.

3. Reversal of CENVAT credit on inputs for exempted final products:
The Tribunal noted that the appellants had reversed the credit initially availed on the inputs used in the manufacture of final products cleared without payment of duty. This reversal of credit was crucial in determining their eligibility for the benefit of the notification.

4. Application of penalty under Rule 25 of the Central Excise Rules, 2002:
The Tribunal set aside the penalty imposed on the appellants under Rule 25 of the Central Excise Rules, 2002, along with the demand of duty and interest, as it ruled in favor of the appellants regarding their entitlement to the notification's benefit.

5. Comparison with relevant case laws:
The Tribunal compared the present case with previous judgments such as Forbes Gokak Mills, Precot Mills Ltd., and Chandrapur Magnet Wires, where the reversal of credit on inputs for exempted final products was considered sufficient for availing the benefit of exemption notifications.

6. Strict construction of exemption Notification:
While the Revenue argued for a strict construction of the exemption notification, the Tribunal relied on the decision in Chandrapur Magnet Wires to support its interpretation that the appellants were entitled to the benefit of the notification based on the reversal of credit on inputs.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellants regarding their entitlement to the benefit of Notification No. 30/2004-C.E. The decision was based on the reversal of CENVAT credit on inputs used in the manufacture of final products cleared without payment of duty.