2017 (7) TMI 678 - AT - Central Excise

Benefit of N/N. 13/2009-CE (NT) dated 03/06/2009 - exemption to zinc Sulphate manufactured and cleared by them during the period January 2007 to 08/10/2007 - Held that - on the legal principles examined by the Original Authority, the respondents are rightly eligible for the exemption under the said notification. The credit attributable to the inputs used for zinc Sulphate have been reversed and as verified by the Jurisdictional officer, the Original Authority gave his finding - exemption allowed. Quantification of proportionate credit - Held that - It is not the date of receipt of inputs, which is relevant to calculate the proportionate credit. The credits, irrespective of the rate of receipt of inputs, attributable to inputs used in the manufacture of zinc Sulphate are to be reversed, in proportion. This aspect may be re-verified and confirmed by the jurisdictional authorities - matter on remand. Appeal dismissed - part matter on remand - decided against Revenue.

Summary

Issues:
1. Eligibility of the respondent for exemption to zinc Sulphate under Notification 13/2009-CE (NT) dated 03/06/2009.
2. Proper quantification of proportionate credit for the inputs used in the manufacture of zinc Sulphate.

Issue 1 - Eligibility for Exemption:
The case involved a dispute regarding the eligibility of the respondent for an exemption to zinc Sulphate manufactured and cleared during a specific period. The exemption was provided under Notification 13/2009-CE (NT) dated 03/06/2009, issued retrospectively. One condition for this exemption was the reversal of Cenvat credit equivalent to the inputs used for manufacturing zinc Sulphate. The Original Authority found the respondents eligible for the exemption as they fulfilled the condition mentioned in the notification.

Issue 2 - Quantification of Proportionate Credit:
The Revenue raised two main issues in their appeal. Firstly, they contended that the reversal of credit was made under protest in another pending proceeding with the Tribunal, and thus, the benefit of the exemption notification should not be extended to the respondent. Secondly, they argued that the quantification of the proportionate credit was not properly done. The Revenue claimed that only the inputs received during the period were considered for reversal, whereas the credit attributable to the inputs used in manufacturing zinc Sulphate should have been accounted for. Additionally, they pointed out that no detailed verification was conducted to accurately quantify the proportionate credit due to the closure of the unit during the relevant period.

The respondent's counsel argued that they had fulfilled the conditions of the notification and acknowledged that even if they succeeded in the other proceedings, they could not claim credit on inputs attributable to zinc Sulphate to avoid violating the exemption notification's conditions.

After hearing both parties and examining the records, the Tribunal found that the respondents were rightly eligible for the exemption under the notification. The credit attributable to the inputs used for zinc Sulphate had been reversed as required. However, the Tribunal agreed with the Revenue's concern regarding the quantification of the proportionate credit, stating that the method used for calculation was incorrect. The Tribunal emphasized that the credits attributable to inputs used in manufacturing zinc Sulphate, regardless of the rate of input receipt, should be reversed in proportion. They directed the jurisdictional authorities to re-verify and confirm this aspect. Apart from this modification, the Tribunal found no merit in the Revenue's appeal and dismissed it accordingly.