2017 (1) TMI 1185 - AT - Central Excise

Reversal of the cenvat credit at the time of opting for availing the exemption N/N. 50/2003-CE dated 10.6.2003 - credit of inputs contained in inputs, work in process and finished goods - Whether the assessee was required to reverse the credit on inputs contained the input, work in process and finished goods lying in stock on the date of opting for exemption under N/N. 50/03-CE or not? - Held that - similar issue decided in the case of Gokaldas Intimate Wear 2011 (4) TMI 1123 - KARNATAKA HIGH COURT , where it was held that till 1-3-2007, the assessee was entitled to benefit, of the cenvat credit in respect of inputs contained in the work in progress and semi finished products - at the time opting area based exemption of N/N. 50/2003-CE dated 10.6.2003, the appellants are not required to reverse the credit in their cenvat credit account lying unutilized. Cash refund - denial on the ground that amount to be refunded by way of re-credit to their Cenvat Credit Account - The assessee is in appeal on the ground that as they are not able to utilize the Cenvat Credit Account, therefore, the refund is to be given in cash whereas the Revenue is in appeal on the ground that the Commissioner (Appeals) erred in holding that the assessee is entitled for refund claim - Whether the assessee is entitled for cash refund or to be credited in Cenvat Credit Account? - Held that - identical issue came up before the Hon ble Uttarakhand High Court in the case of APCO Pharma Ltd. 2011 (10) TMI 38 - UTTARAKHAND HIGH COURT , where it was held that in a situation where the assessee is not in a position to utilize the Cenvat Credit Account, the refund claim is to be given in cash. Therefore, we hold that the assessee is entitled for refund claim of the amount paid by the assessee on account of reversal of credit in cash. Appeal dismissed - decided against Revenue.

Issues Involved:
1. Whether the assessee was required to reverse the credit on inputs contained in the input, work in process, and finished goods lying in stock on the date of opting for exemption under Notification No.50/03-CE.
2. Whether the assessee is entitled to a cash refund or should it be credited to the Cenvat Credit Account.

Issue No.(a): Reversal of Credit on Inputs

The Tribunal examined whether the assessee was required to reverse the credit on inputs, work in process, and finished goods lying in stock when opting for exemption under Notification No.50/2003-CE. The Tribunal referred to multiple judicial pronouncements to resolve this issue.

1. Saboo Alloys Pvt. Ltd. Case: The Hon'ble High Court observed that even though the final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Modvat credit already taken by it.

2. Gokaldas Intimate Wear Case: The Hon'ble Karnataka High Court held that once the input credit is legally taken and utilized on the dutiable final product, it need not be reversed on the final product being exempted subsequently. The court emphasized that the credit availed on inputs till the date of exemption vests in the assessee and cannot be divested.

3. HMT Case: The larger bench of the Tribunal held that when the input-credit is legally taken and utilized on the dutiable final products, it need not be reversed on the final product becoming exempt subsequently.

4. Ranbaxy Laboratories Ltd. Case: The Hon'ble Himachal High Court reiterated that even though the final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Modvat credit already taken by it.

5. United Vanaspati Ltd. Case: The Hon'ble High Court of Himachal Pradesh observed that there is no provision in the rules which provides for a reversal of the credit by the Excise Authorities except where it has been illegally or irregularly taken. The credit is indefeasible and should be available to the manufacturer without any limitation in time or otherwise.

Based on these precedents, the Tribunal concluded that the assessee was not required to reverse the credit at the time of opting for the exemption under Notification No.50/2003-CE. The Tribunal affirmed that the issue is settled in favor of the assessee and against the Revenue.

Issue No.(b): Entitlement to Cash Refund

The assessee contended that they should receive a cash refund as they are unable to utilize the Cenvat Credit Account due to operating under the exemption Notification No.50/2003-CE.

1. APCO Pharma Ltd. Case: The Hon'ble Uttarakhand High Court observed that if the assessee is not in a position to utilize the credit, the refund should be given in cash. The court held that the Commissioner (Appeals) was justified in giving the assessee a cash refund of the credit.

The Tribunal agreed with this view, stating that in situations where the assessee cannot utilize the Cenvat Credit Account, the refund claim should be given in cash. Consequently, the Tribunal set aside the part of the impugned order that directed the refund to be credited to the Cenvat Credit Account and held that the refund should be given in cash.

Conclusion:
The Tribunal dismissed the appeal filed by the Revenue and allowed the appeal filed by the assessee. The refund claim was to be given in cash with consequential relief to the assessee.

Pronounced in the open court.

← Previous Next →