2005 (8) TMI 9 - AT - Central Excise

Cenvat credit availed when the goods were liable to duty but subsequently exempted w.e.f. 9.7.2004. Credit already taken in respect of inputs in stock or contained in tractors in stock on 8.7.2004

Summary

Issues:
1. Appeal against Order-in-Original passed by the Commissioner of Central Excise, Bangalore regarding reversal of Cenvat credit on inputs used in manufacturing tractors exempted from duty.

Analysis:
The appeal was filed challenging the Order-in-Original passed by the Commissioner of Central Excise, Bangalore, regarding the reversal of Cenvat credit on inputs used in manufacturing tractors exempted from duty. The appellant had a closing stock of tractors and inputs on which credit was availed. The Revenue alleged non-reversal of credit on inputs used in manufacturing the exempted tractors. The Commissioner's order demanded recovery of the Cenvat credit involved, interest under Section 11AB, and imposed a penalty under Rule 13 of the Cenvat Credit Rules, 2002. The appellant contended that once credit is validly taken, it is available without any time limitation, citing legal precedents. The appellant also argued that the decision of a Larger Bench should prevail over a two-member bench decision. Additionally, the appellant challenged the reliance on certain tribunal decisions and a circular issued by the Board. The learned departmental representative supported the order-in-Original.

The Tribunal carefully reviewed the case records and legal arguments presented. It noted that the appellant's action of taking credit was lawful and there was no provision to reverse the credit when legally obtained. Citing the decision in Dai Ichi case and the precedent set by the Larger Bench in a specific case, the Tribunal agreed with the appellant's position that the credit need not be reversed when the final product is subsequently exempted from duty. The Tribunal emphasized the importance of following the decision of the Larger Bench over a two-member bench decision. It found that the Commissioner's reliance on certain tribunal decisions and a circular was misplaced. Consequently, the Tribunal held that the Commissioner's order lacked merit and was liable to be rejected. The appeal was allowed with consequential relief, and the judgment was pronounced in open court on 24.8.2005.