2018 (5) TMI 812 - AT - Central Excise

CENVAT credit availed on AED (GSI) and AED (T&TA) - N/N. 30/2004-CE dated 09.07.2004 - Held that - Ld. Commissioner (Appeals) upheld the order of the Adjudicating Authority observing that the Cenvat credit availed on AED (GSI) and AED (T&TA), lying in balance, as on the date of exercising option to avail the exemption under N/N. 30/2004-CE dated 09.07.2004, would lapse. A plain reading of the Sub-Rule (2) of Rule 9 it is clear that it is applicable only to cases, when the assessee has availed value based exemption - Hon ble Karnataka High Court in the case of CCE, Bangalore-II vs. Gokaldas Intimate Wear 2011 (4) TMI 1123 - KARNATAKA HIGH COURT observed that Sub-Rule (3) of Rule 11 of the Cenvat Credit Rules brought into force by N/N. 10/2007-CE w.e.f. 01.03.2007, and would be applicable prospectively. The impugned order is modified to the extent of upholding confirmation of the demands of Cenvat Credit of 83,665/- and ₹ 35,340/- and the demands of ₹ 15,81,781/- and ₹ 24,42,530/- are set-aside - appeal allowed in part.

Summary

Issues:
- Interpretation of Rule 9(2) of CCR, 2002/2004 regarding lapsing of Cenvat credit upon availing exemption.
- Interpretation of Rule 11(3) of CCR, 2004 concerning lapsing of Cenvat credit on inputs upon opting for exemption.
- Applicability of Rule 11(3) of CCR, 2004 retrospectively.
- Confirmation of demands for Cenvat credit balance and Cotton Produce Cess.

Interpretation of Rule 9(2) of CCR, 2002/2004:
The case involved appeals against orders confirming demands for Cenvat credit balance and Cotton Produce Cess. The appellants contested the confirmation of demands related to Cenvat credit balance, arguing it was unsustainable in law. The Ld. Commissioner (Appeals) upheld the demands, citing Rule 9(2) of CCR, 2002/2004, stating the credit would lapse upon availing exemption. The appellants argued the Rule was not applicable as the exemption was not value-based. They relied on precedents to support their stance. The Tribunal noted Rule 9(2) applies to value-based exemptions, as held in previous cases. Consequently, the demands for Cenvat credit balance were set aside, partially allowing the appeals.

Interpretation of Rule 11(3) of CCR, 2004:
Regarding Rule 11(3) of CCR, 2004, the Ld. Commissioner (Appeals) upheld the demands based on this rule, asserting that the Cenvat credit on inputs would lapse upon opting for exemption. The appellants contested this interpretation, highlighting the rule's prospective application from 01.03.2007. They referred to relevant judgments to support their argument. The Tribunal considered the precedents and ruled that Rule 11(3) applies prospectively, as brought into force in 2007. Since the case pertained to a period before this amendment, the demands related to this rule were set aside, partially allowing the appeals.

Applicability of Rule 11(3) of CCR, 2004 retrospectively:
The Tribunal clarified that Rule 11(3) of CCR, 2004 applies prospectively from 01.03.2007. Citing precedents and the specific wording of the rule, the Tribunal held that the rule did not have retrospective application. This interpretation influenced the decision to set aside the demands associated with this rule.

Confirmation of demands for Cenvat credit balance and Cotton Produce Cess:
In conclusion, the Tribunal modified the impugned order by upholding the confirmation of demands for Cenvat credit of specific amounts and Cotton Produce Cess. However, the demands related to the Cenvat credit balance under Rule 9(2) and Rule 11(3) were set aside, partially allowing the appeals. The judgment emphasized the importance of interpreting rules in accordance with their applicability and prospective nature, leading to a nuanced decision in the case.