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2017 (10) TMI 1177 - AT - Central ExciseSSI Exemption - N/N. 8/2003-CE dated 01.03.2003 - Rule 11(2) of the Credit Rules - due to ignorance, credit was not reversed - Department entertained the view that the appellant was not entitled to the exemption under the SSI Notification dated 01.03.2003 on the grounds of non-reversal of the Cenvat Credit of ₹ 2,593/- on 31.03.2005 and non-filing of the intimation that the appellant would be availing full exemption with effect from 01.04.2005. Held that - the whole show was notice is misconceived. There is no allegation that the appellant had any credit balance in their Cenvat Credit account as on 01 April, 2005. Under the provisions of Rule 11(2) of CCR, 2004 what is required is to be written off is Cenvat Credit lying unutilized in the Cenvat Credit Register on date of option to avail exemption - Further, the appellant had suo motu deposited the Cenvat Credit on the inputs lying in stock and also given intimation to the Revenue. Such deposit was made prior to issue of show cause notices. Accordingly, the impugned orders are not sustainable. Appeal allowed - decided in favor of appellant.
Issues involved: Availability of SSI exemption under Notification No.8/2003, compliance with Rule 11(2) of the Credit Rules, denial of SSI exemption by the Department, validity of show cause notices, grounds for rejecting SSI exemption, appeal against rejection of SSI exemption.
Analysis: 1. Availability of SSI Exemption: The appellant transitioned from availing Cenvat Credit to opting for full exemption under SSI Notification No.8/2003-CE without filing any intimation. The Department contended that the appellant did not reverse the Cenvat Credit of ?2,593/- and failed to inform the Department of availing the exemption from 01.04.2005. The Revenue argued that the appellant did not comply with Rule 11 of the Cenvat Credit Rules, 2004, by not paying the equivalent Cenvat Credit amount on inputs in stock. The appellant's defense focused on the automatic availability of full exemption under the Notification without the need for a written option. 2. Compliance with Rule 11(2) of Credit Rules: The Department issued show cause notices alleging non-compliance with Rule 11(2) of the Credit Rules, leading to denial of SSI exemption. The appellant argued that all conditions for availing full exemption were met, and any procedural lapses should not result in denial of substantial benefits. The Tribunal noted that the appellant had deposited the Cenvat Credit amount on inputs in stock before the show cause notices were issued, indicating compliance with the rule. 3. Validity of Show Cause Notices: The Tribunal found the show cause notices misconceived as there was no credit balance in the Cenvat Credit account on 01 April 2005. Rule 11(2) required writing off unutilized Cenvat Credit on the date of opting for exemption, which the appellant had done. The appellant's proactive deposit of the Cenvat Credit and intimation to the Revenue prior to the show cause notices demonstrated compliance with the rule. Consequently, the Tribunal held that the impugned orders denying SSI exemption were unsustainable and allowed the appeals, setting aside the orders. 4. Grounds for Rejecting SSI Exemption: The Department rejected SSI exemption due to alleged non-reversal of Cenvat Credit and failure to provide intimation. However, the Tribunal found that the appellant had fulfilled the requirements of Rule 11(2) by depositing the Cenvat Credit amount and providing intimation, making the rejection of SSI exemption unjustified. The Tribunal emphasized that procedural lapses should not result in denying substantive benefits under the law. 5. Appeal Against Rejection of SSI Exemption: The appellant's appeal before the Tribunal challenged the rejection of SSI exemption based on the Department's contentions regarding non-compliance with Rule 11 of the Credit Rules. The Tribunal, after considering the arguments from both sides, concluded that the appellant had met the necessary conditions for availing full exemption and that the show cause notices were misconceived, leading to the allowance of the appeals and setting aside of the impugned orders. In conclusion, the Tribunal's decision highlighted the importance of procedural compliance but emphasized that substantial benefits should not be denied due to procedural lapses when the essential conditions for availing exemptions are met.
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