2017 (5) TMI 276 - AT - Central Excise

Area based exemption - N/N. 49/2003-CE & 50/2003-CE dated 10.06.2003 - Department opined that the assessee-Appellants were liable to reverse the Cenvat Credit on inputs and capital goods lying in stock - Held that - Cenvat Credit which was validly availed at the time of receipt of the inputs for the manufacture of the final products, on which excise duty was payable, but subsequently utilized for the manufacture of the same final product which became exempted from payment of excise duty pursuant to a subsequent notification, was not liable to be reversed under Rule 6(1) of the CCR, 2002 - when the SCN was dropped vide order dated 17.10.2005 and the CESTAT upheld the same vide order dated 08.03.2017. When it is so, then the subsequent proceedings by issuing fresh notice on 01.02.2007 are not in good taste especially when the refund of ₹ 82,698/- ₹ 1291/- (interest) was denied which is allowable even on merits - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
1. Denial of duty exemption benefit based on area under Notification No.49/2003-CE & 50/2003-CE.
2. Reversal of Cenvat Credit on inputs and capital goods.
3. Refund application granted and subsequent appeal rejection.
4. Fresh show cause notice issued challenging the refund granted erroneously.

Analysis:
1. The appeals were filed against the Order-in-Appeal dated 19.12.2007 by the Commissioner of Customs & Central Excise, Meerut-II, denying duty exemption benefit under Notification No.49/2003-CE & 50/2003-CE. The Tribunal allowed the claim of the assessee-Appellants by setting aside the impugned order, citing the case laws of M/s Shree Krishna Paper Mills & Industries Ltd. and The General Manager, Century Pulp & Paper, which highlighted that validly availed Cenvat credit for inputs used in the manufacture of a product exempted subsequently from excise duty is not liable to be reversed under Rule 6(1) of the Cenvat Credit Rules, 2002.

2. The Department had opined that the assessee-Appellants were liable to reverse the Cenvat Credit on inputs and capital goods lying in stock. However, the Tribunal upheld the claim of the assessee-Appellants, emphasizing that the Cenvat credit legally availed at the time of receipt of inputs for manufacturing a final product, subsequently exempted from excise duty, need not be reversed under the Cenvat Credit Rules, as per the judicial precedents discussed during the hearing.

3. Following the dropping of the show cause notice on 17.10.2005, the assessee-Appellants filed a refund application, which was granted by the adjudicating authority. Subsequently, the Department's appeal before the Commissioner (Appeals) was rejected, and the Tribunal upheld the rejection, maintaining the grant of refund to the assessee-Appellants based on the legal principles discussed during the proceedings.

4. A fresh show cause notice was issued challenging the refund granted erroneously, leading to further legal proceedings. However, the Tribunal, after considering the arguments and case laws presented by both parties, set aside the impugned orders and allowed the appeals filed by the assessee-Appellants, emphasizing the validity of the Cenvat credit availed by them prior to opting for the benefit of the notification exempting the final product from excise duty.