2017 (4) TMI 324 - AT - Central Excise

CENVAT credit - SSI exemption - Rule 11 of CCR, 2004 - while opting exemption in terms of small scale notification, the balance credit, if any, would lapse, in terms of Rule 11 of CCR, 2004 and as such would not be available for utilisation - the contention of the appellant is that it has carried forward and utilised the credit during the period 1-4-2010. As such the SCN issued on 21-3-2010 is barred by limitation. They have also taken an additional ground that apart from clearing the kraft paper under exemption, they also paid paper cess at the rate of 125% of the assessable value u/s 9 of the Industries (Development and Regulation) Act, 1951, which is nothing but the duty of excise - Held that - the matter needs to be go back for considering the plea of the assessee - appeal allowed by way of remand.

Summary

Issues:
1. Lapsing of balance credit under Rule 11 of Cenvat Credit Rules, 2004.
2. Barred by limitation for show cause notice.
3. Applicability of Rule 11 due to payment of paper cess.
4. Remand for considering additional plea and limitation issue.

Analysis:
1. The appellant, engaged in manufacturing M.G. Kraft paper, opted for exemption under Notification No. 4/2008-C.E. from 1-4-2008, clearing goods at nil duty rate. They reversed Cenvat credit on inputs, but a balance of ?11,72,064/- remained. The appellant continued exemption in 2009-10 but started paying duty from 1-4-2010, utilizing the balance credit carried forward from 2008.

2. Proceedings were initiated against the appellant for alleged lapsing of balance credit under Rule 11 of Cenvat Credit Rules, 2004. The lower authorities upheld the demand and penalty imposition, citing Rule 11 which states that balance credit, after opting for exemption, shall lapse and not be utilized for duty payment.

3. The appellant argued that they utilized the credit post-1-4-2010, making the show cause notice issued on 21-3-2010 time-barred. Additionally, they contended that paying paper cess rendered their final product not fully exempt, thus challenging the applicability of Rule 11. This plea was not presented before lower authorities, necessitating a remand to consider this argument.

4. The Tribunal found Rule 11 mandates lapsing of balance credit, but the appellant's utilization post-1-4-2010 raises the limitation issue. The matter was remanded to the original authority to review the additional plea, assess the limitation aspect, and reconsider the penalty based on the outcome of these issues. The appeal was allowed for remand, emphasizing a fresh examination of the case.