2016 (9) TMI 129 - AT - Central Excise

Revarsal of Cenvat credit - invokation of Rule 6(1) of the Cenvat Credit Rules, 2002 - appellant opted to avail exemption under Notification No. 30/2004-CE dated 9.7.2004 which provided exemption to the product manufactured by them - Cenvat credit availed on inputs lying in the stock, in process and contained in the final products, on the date of opting for exemption - Held that - the Rule 9(2) of Cenvat Credit Rules, 2002 produced by the Revenue prescribed reversal of credit only in case where the exemption is based on value or quantity of clearances in a financial year. In the circumstance, we find that the decision of the larger bench of the Tribunals the case of Ashok Iron and Steel Fabricators 2002 (1) TMI 91 - CEGAT, NEW DELHI is squarely, applicable to the instant case. Also it is found that the grounds of appeal do not contradict the averment made by the respondents before the Commissioner (Appeals). Therefore, if the respondent have used the inputs on which credit was taken only on dutiable finished goods, the question of invoking Rule 6 (1) does not arise. - Decided against the Revenue

Summary

Issues:
Challenge to reversal of cenvat credit on inputs following exemption under Notification No. 30/2004-CE dated 9.7.2004.

Detailed Analysis:

1. Issue of Reversal of Cenvat Credit: The case involved a dispute regarding the reversal of cenvat credit on inputs following the appellant's decision to avail of exemption under Notification No. 30/2004-CE dated 9.7.2004. The Revenue challenged the decision based on Rule 9(2) of Cenvat Credit Rules, 2002 and Rule 6 of the same rules. The Revenue also relied on Circular No. 795/28/2004-CX, which clarified the requirement to reverse credit on inputs used in final products that become exempt. The Tribunal examined the provisions and arguments presented by both parties.

2. Interpretation of Rules and Circular: The appellant's counsel argued that prior to 1.3.2004, there was no provision for credit reversal, citing a decision by a Larger Bench of the Tribunal and its affirmation by the Supreme Court. The counsel contended that the inputs were used in dutiable products before the exemption and that the option to pay duty was available. The Tribunal considered these arguments alongside the provisions of Rule 9(2) and Rule 6 of the Cenvat Credit Rules, 2002, to determine the applicability of credit reversal in this case.

3. Application of Precedents: The Tribunal noted that the decision in the case of Ashok Iron and Steel Fabricators, upheld by the Supreme Court, was relevant as it addressed similar issues under the earlier modvat scheme. The Tribunal examined Rule 9(2) of the Cenvat Credit Rules, 2002, which specified conditions for credit reversal upon opting for exemption based on clearances in a financial year. The Tribunal found that the appellant's utilization of inputs in dutiable products aligned with the conditions, thus negating the need for credit reversal under Rule 6(1) of the Cenvat Credit Rules, 2002.

4. Decision and Dismissal of Appeal: After considering the submissions and provisions, the Tribunal concluded that the grounds of appeal did not contradict the appellant's claim of utilizing inputs in dutiable finished goods. Therefore, the Tribunal found no merit in the Revenue's appeal and dismissed it accordingly. The judgment clarified the application of rules and precedents in determining the requirement for reversal of cenvat credit in the given scenario, ultimately ruling in favor of the appellant.