2017 (8) TMI 780 - AT - Central Excise

Reversal of cenvat credit after finished goods become exempted goods - N/N. 10/2003 - Held that - Hon ble Madras High Court in the case of Tractor and Farm Equipment Ltd. Vs CCE Madurai-II - 2014 (12) TMI 905 - MADRAS HIGH COURT has held that If credit can be taken against excise duty on a final product manufactured on the very day it makes it abundantly clear that there need not be co-relation between the input and the goods cleared and as a result validly taken credit need not be reversed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Reversal of cenvat credit on inputs used in the manufacture of exempted printed labels post Notification No.10/2003.

Analysis:
The appellant, engaged in manufacturing printed cartons, labels, boxes, and paper boards, availed cenvat credit on inputs for final products. After printed labels were exempted from duty post Notification No.10/2003, the Revenue demanded reversal of cenvat credit on inputs in semi-finished, finished products in process, and those used in finished products in stock. The appellant contested, arguing that credit was taken when finished products attracted duty, and no irregularity existed. Citing the Tractor and Farm Equipment Ltd. case, the appellant highlighted the lack of correlation between raw material and final product for credit reversal. The Hon'ble Madras High Court's decision supported this argument, emphasizing that no correlation is necessary, and validly taken credit need not be reversed post-duty exemption.

The bench, after considering the appellant's arguments and the case law cited, agreed with the appellant's position based on the Hon'ble Supreme Court's decision. Quoting the Hon'ble Madras High Court's ruling, the bench emphasized that no correlation is needed between input and cleared goods, and once goods become duty-exempt, no credit can be taken for inputs received afterward. Consequently, the impugned order demanding cenvat credit reversal was set aside, and the appeal was allowed with any consequential relief as per law. The decision was pronounced in open court on 12.06.2017.