2017 (5) TMI 328 - AT - Central Excise

SSI exemption - N/N. 8/2003-CE dated 1.3.2003 - denial on the ground that the assessee has availed CENVAT credit - reversal of credit when it was understood that they are not able to export the goods - Held that - the credit availed was not utilized by the appellant. In this situation, when the credit though availed and reversed before utilization thereof, it will amount to non-availment of credit. Accordingly, the condition of N/N. 8/2003-CE stand complied with - the appellant is entitled for the SSI exemption N/N. 8/2003-CE dated 1.3.2003 - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of SSI exemption Notification No.8/2003-CE dated 1.3.2003 regarding availing of CENVAT Credit.

Analysis:
The case involved a dispute where the appellant had availed CENVAT Credit of duty paid on inputs while claiming SSI exemption under Notification No.8/2003-CE dated 1.3.2003. The show-cause notice contended that by availing the credit, the appellant was ineligible for the exemption, leading to a demand for excise duty and penalties. The adjudicating authority upheld the demand, imposing penalties and ordering interest recovery. The Commissioner (Appeals) later reduced the demand but maintained penalties under Rule 25. The appellant challenged this decision.

The appellant argued that they intended to use the credit for manufacturing export goods, making Notification No.8/2003 inapplicable. However, due to the cancellation of export orders, the finished goods were not exported, prompting the reversal of the credit without utilization. The appellant contended that this reversal amounted to non-availment of credit, fulfilling the conditions of the notification and making the exemption valid.

The Revenue, represented by the Assistant Commissioner, supported the findings of the impugned order, emphasizing the ineligibility of the appellant for the SSI exemption due to availing the CENVAT Credit.

The Member (Judicial) analyzed the submissions and precedent, noting that although availing CENVAT Credit would typically disqualify the appellant from the exemption, the specific circumstances of the case demonstrated that the credit was reversed before utilization upon realizing the goods would not be exported. Citing a Supreme Court decision, the Member concluded that such reversal constituted non-availment of credit, aligning with the conditions of the notification. Therefore, the appellant was deemed entitled to the SSI exemption under Notification No.8/2003-CE dated 1.3.2003, rendering the demand unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed.