2009 (3) TMI 146 - AT - Central Excise

Cenvat Credit Final Product Exempted subsequently held that - It was held by the Larger Bench that input credit legally taken and utilised on the dutiable final product need not be reversed on the final product becoming exempted subsequently. The findings of law arrived at by the Larger Bench in case of M/s. H.M.T., fully covers the disputed issue demand of duty is not sustainable.

Summary

Issues Involved:
Recovery of Modvat credit on duty paid inputs for Intravenous Fluid exempted from duty.

Analysis:
The appellants were manufacturing Intravenous Fluid, initially attracting duty at 10%, which was later exempted from duty with effect from a specific date. A show cause notice seeking recovery of Modvat credit on duty paid inputs used in manufacturing the Intravenous Fluid was issued to the appellants. The demand of duty and penalty were confirmed against the appellant based on the argument that the credit availed on duty paid inputs would not be available once the final product became exempted from duty.

The Commissioner (Appeals) acknowledged that the issue was previously addressed by a Larger Bench of the Tribunal in a specific case, which was upheld by the Hon'ble Supreme Court. However, the Commissioner referred to another decision of the Tribunal in a different case where the appeal was rejected by the Supreme Court. The Commissioner held that the Larger Bench decision would not be applicable due to the subsequent decision confirmed by the Supreme Court.

The matter was reconsidered by another Larger Bench in a different case, where the issue was whether the credit taken on inputs in stock or in process, or in the final product, when the final product becomes exempted, should be recovered. The Larger Bench considered the previous decisions and concluded that input credit legally taken and utilized on the dutiable final product does not need to be reversed when the final product becomes exempted subsequently. The findings of law by the Larger Bench in this case covered the disputed issue.

Therefore, based on the decision of the Larger Bench in the later case, the impugned order was set aside, and the appeal was allowed with consequential relief. The judgment was pronounced in court on a specific date.