2009 (2) TMI 153 - AT - Central Excise

Reversal of Cenvat Credit goods become exempted after availing cenvat credit on inputs - there were no provisions in the statute to recover any amount of CENVAT credit availed or utilized in accordance with relevant provisions. Deciding a similar dispute as on hand the Tribunal decided that input-credit legally taken and utilized on the dutiable final products, need not be reversed on the final products becoming exempt subsequently with effect from 9-7-04. In the result, demands for recovery of CENVAT credit relatable inputs and work-in-progress and final products in stock on 9-7-04 with the assessees are not sustainable. The appeals filed by Revenue are dismissed. The appeals of the assessees and cross-objections filed by M/s. Shalom Garments (P) Ltd. are allowed with consequential relief.

Summary

Issues:
1. Admissibility of credit relatable to inputs and finished goods when final products are exempted.
2. Entitlement to refund of CENVAT credit availed.

Analysis:
1. The dispute in this case revolves around the admissibility of credit related to inputs and finished goods when final products are exempted from excise duty after the credit was availed and utilized as per statutory provisions. The Commissioner (Appeals) had initially ruled in favor of the assessees, allowing them to claim a refund of the credit except for inputs in stock. However, the Revenue challenged this decision, arguing that the credit relatable to inputs in finished goods and work-in-progress should not be refunded. The Tribunal referred to various judicial authorities, including the decision of the Hon'ble Supreme Court in Collector v. Dai Ichi Karkaria Ltd., emphasizing that once credit is validly taken, it is indefeasible and can be utilized without any time limitations unless the manufacturer chooses not to use the raw material in the final product. The Tribunal also highlighted the decision of the Larger Bench in HMT v. CCE, which held that there are no provisions in the statute to recover CENVAT credit availed or utilized in accordance with the law. Therefore, the Tribunal concluded that the demands for recovery of CENVAT credit related to inputs and finished products were not sustainable, dismissing the appeals filed by the Revenue and allowing the appeals of the assessees and cross-objections filed by M/s. Shalom Garments.

2. The second issue in this case pertains to the entitlement of the assessees to claim a refund of the CENVAT credit availed. The assessees had initially reversed the credit at the instance of the department but later sought a refund, contending that they were not required to reverse the credit when the final products became exempt from excise duty. The Commissioner (Appeals) had allowed the refund of credit relatable to inputs issued for manufacture and at different stages of production, except for inputs in stock. The assessees relied on a decision of the Larger Bench in H.M.T. v. CCE to support their claim. On the other hand, the Revenue argued that the appeals should be supported by judgments of the Apex Court and the High Court of Allahabad. The Tribunal, after considering the submissions from both sides and the relevant legal precedents, upheld the decision of the Commissioner (Appeals) and allowed the refund of credit relatable to inputs and work-in-progress, dismissing the appeals filed by the Revenue and granting consequential relief to the assessees and M/s. Shalom Garments (P) Ltd.