2017 (10) TMI 549 - AT - Central Excise

Benefit of N/N. 30/2004-CE dated 09.07.2004 - yarn cleared for captive consumption prior to 01.08.2005, when the yarn was dutiable - whether the appellants are correct in reversing the CENVAT credit attributable to the inputs used in the manufacture of the yarn, which in turn had been used in the manufacture of fabrics? - Held that - In the case of K.G. Denim Ltd. Vs. CCE 2005 (9) TMI 127 - CESTAT, CHENNAI , the Tribunal held that since the assessee reversed the entire Cenvat credit on inputs, correctable to the finished products cleared by them, they are eligible for the benefit of N/N. 30/2004 ibid - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellants correctly reversed the Cenvat credit attributable to inputs used in manufacturing yarn for fabric production.
- Whether the appellants are liable to pay duty on the yarn cleared for captive consumption prior to a specific date.

Analysis:

Issue 1: Reversal of Cenvat credit on inputs for yarn manufacturing
The appellants, engaged in manufacturing polyester yarn, opted for exemption under Notification No.30/2004-CE for blended fabrics. They reversed the credit attributable to polyester stable fiber, processing chemicals, and dyes used in yarn production. The dispute arose when polyester fabrics made from this yarn were cleared without duty payment under Notification No.67/95-CE. The original authority demanded duty on the yarn consumed for exempted goods manufacturing. The Commissioner (Appeals) modified the demand but upheld the penalty. The Revenue argued that the appellants were not supposed to expunge credit on the yarn since the final products were chargeable to duty when cleared. However, precedent decisions by the Chennai and Bangalore Tribunal favored the appellants, emphasizing that reversing the entire credit on inputs made them eligible for the benefit of Notification No.30/2004.

Issue 2: Liability to pay duty on yarn cleared for captive consumption
The dispute revolved around whether duty was payable on the yarn cleared for captive consumption before a specific date. The Revenue contended that duty was required on the yarn stock as of 01.08.2005, even though the appellants had reversed the credit. The Tribunal referred to previous cases like K.G. Denim Ltd. Vs. CCE and Page Apparels Pvt. Ltd. Vs. CCE, where it was held that since the credit on inputs was reversed correctly, the benefit of the exemption notification applied. Following these precedents, the Tribunal set aside the impugned order, allowing the appellants' appeal with consequential relief and dismissing the Revenue's appeal.

In conclusion, the Tribunal ruled in favor of the appellants, emphasizing the correctness of reversing the Cenvat credit on inputs for yarn manufacturing and the eligibility for exemption under Notification No.30/2004-CE. The decision highlighted the importance of adhering to legal provisions and previous judicial interpretations in resolving excise duty disputes effectively.