2016 (6) TMI 572 - AT - Central Excise

Exemption for manufacturing of body building on the procured chassis - condition on availing credit versus availing credit and reversing the credit @8% - notification 4/97 dated 01.03.1997 and subsequent notification no. 5/98 dated 02.06.1998 - whether the assessee was entitled to the exemption or not? - Held that - As rightly observed by Commissioner (A) the assessee has reversed 8% of the value (whatever value it may be) that is whether inclusive of chassis or not, which would amount to reversal of cenvat credit availed by the assessee. However, we find that though the legal issue held in favour of the assessee by Commissioner (A) is correct but the fact as to whether the reversal of 8% amounted to full reversal of cenvat credit availed by the assessee or not is still required to be examined. It may happen that the reversal of 8% is less than full credit availed by the assessee or in a given case it can be more also. As such it is absolutely necessary for the assessee so as to earn the benefit of the exemption notification to establish that the entire credit availed by them in respect of the inputs used in the manufacture of exempted goods stands reversed by them. If there is shortfall in such reversal, the assessee is required to be given an opportunity to reverse the same. At this stage both the sides submits that it may not be possible for them to exactly find out as to which input has gone into the manufacture of which vehicle that is whether excisable or dutiable. The said exercise of finding out the quantum of input used in the manufacture of inputs and contested quantum of credit availed can be done on proportionate basis for which purpose we set aside the impugned order and remand the matter to original Adjudicating Authority. The adjustment required to be done by him with the corporation of the assessee would be to find out quantum of inputs used in the manufacture of exempted product and consequently quantum of credit availed by the assessee. Subsequently by taking note of the 8% reversal already done by them, the quantum of differential credit, if any, would be arrived at which the appellant would be liable to reverse, so as to set the matter at rest.

Summary

Issues:
Interpretation of notification no. 4/97-CE and 5/98 & 5/99 regarding non-availment of Cenvat Credit, applicability of Rule 57CC on reversal of credit, entitlement to exemption, and quantum of credit reversal.

Analysis:
The case involved an appeal by the Revenue against an order passed by the Commissioner (A) regarding the exemption available to the respondent, engaged in manufacturing body building on procured chassis. The respondent availed input credit for various inputs used in manufacturing and cleared their final product by paying full duty. However, they also received chassis from sources other than the manufacturer and availed exemption under specific notifications, which required non-availment of duty credit on chassis and other inputs. The Revenue contested the exemption due to the respondent's credit availing on other inputs, leading to a demand for duty payment. The issue revolved around the applicability of Rule 57CC, which mandated a 8% reversal on the value of the final exempted product. The Commissioner (A) ruled in favor of the respondent, considering the 8% reversal as equivalent to credit reversal, thus making the exemption applicable. However, the core issue was whether the reversal truly equated to full credit reversal, necessitating further examination.

The Tribunal analyzed the interpretation of the relevant notifications and the application of Rule 57CC. It noted that the key issue was the entitlement to exemption based on credit reversal. While the Commissioner (A) deemed the 8% reversal as fulfilling the condition, the Tribunal highlighted the importance of ensuring complete credit reversal for exemption eligibility. As determining the exact credit reversal might be complex due to mixed inputs in manufacturing, the matter was remanded to the Adjudicating Authority for a proportional assessment. The Authority was tasked with calculating the differential credit requiring reversal by the respondent to align with the exemption conditions. The Tribunal emphasized the necessity for the respondent to demonstrate full credit reversal to benefit from the exemption, indicating a need for precise credit assessment. Thus, the appeal was disposed of with instructions for further examination and adjustment of credit reversal to resolve the issue conclusively.