2017 (1) TMI 301 - AT - Central Excise

CENVAT credit - denial on the ground that coal was unconditionally exempt - Held that - the said notification does not grant exemption from payment of excise duty absolutely but subject to the condition specified in the notification. The basis in the impugned order for denying the Cenvat credit is that excise duty has been paid by the supplier of coal, when they were not required to pay the excise duty in view of the exemption granted under Notification No. 63/1995 dated 16.3.1995. In view of the fact that the notification has extended the benefit subject to conditions, I find that the denial of Cenvat credit is not justified - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of Cenvat credit on coal due to exemption withdrawal
- Interpretation of Notification No. 63/95-CE
- Applicability of Cenvat credit Rules, 2002

Analysis:

Issue 1: Disallowance of Cenvat credit on coal due to exemption withdrawal
The appeal challenged the Order-in-Appeal disallowing Cenvat credit of ?19,74,118 concerning coal duty. The coal supplier mistakenly paid duty post-exemption withdrawal, prompting the denial of Cenvat credit. The appellant argued that the exemption was conditional, allowing credit for duty actually paid. The denial was based on the supplier's unnecessary duty payment. The Tribunal found the denial unjustified due to the conditional nature of the exemption.

Issue 2: Interpretation of Notification No. 63/95-CE
Notification 63/95-CE exempted coal duty until withdrawal on 24.03.2011. The notification specified exemption subject to conditions, not absolute. The denial of Cenvat credit was based on supplier duty payment despite exemption. The Tribunal ruled in favor of the appellant, citing the conditional nature of the exemption and allowing the appeal.

Issue 3: Applicability of Cenvat credit Rules, 2002
The appellant referenced judgments supporting Cenvat credit for duty-paid inputs. Case laws highlighted that Rule 3 of the Cenvat credit Rules, 2002 permits credit for duty paid on inputs, not just duty payable. The Tribunal considered these arguments, ultimately setting aside the impugned order and allowing the appeal based on the conditional exemption and relevant case laws.

In conclusion, the Tribunal overturned the Order-in-Appeal disallowing Cenvat credit on coal, emphasizing the conditional nature of the exemption and the applicability of Cenvat credit Rules, 2002. The judgment clarified the interpretation of Notification No. 63/95-CE and upheld the appellant's right to claim Cenvat credit for duty actually paid on inputs.