2018 (7) TMI 760 - AT - Central Excise

Recovery of CENVAT Credit - Cotton Yarn - it was alleged that since cotton yarn attracted nil rate of duty, the appellants are not eligible to avail credit - various notifications issued for levy and deletion of duty on Cotton Yarn during the relevant period - Held that - Though there were parallel notifications wherein one of the notification prescribed duty at the rate of 4% on cotton yarn, there was another N/N. 58/2008 dated 7.12.2008 which prescribed nil rate of duty. Thus, on the same date there were two notifications one of which prescribed nil rate of duty and the other prescribed 4% duty. The appellant can opt for a notification which is beneficial to him and the appellant herein has chosen to pay duty at the rate of 4% and claim rebate - denial of credit not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Dispute over the duty rate on cotton yarn.
2. Recovery of CENVAT credit.
3. Rebate claim for refund of duty paid.

Analysis:

1. Dispute over the duty rate on cotton yarn:
The case involved a dispute regarding the duty rate applicable to cotton yarn during a specific period. The appellant argued that cotton yarn was never fully exempted from duty, despite conflicting notifications. The appellant contended that they were liable to pay duty on cotton yarn for the disputed period, making the credit availed on inputs, capital goods, and input services eligible. The appellant referenced a case to support their argument. The Tribunal examined the notifications and concluded that cotton yarn was not an exempted product during the disputed period. The Tribunal highlighted the existence of two notifications, one prescribing nil duty and the other prescribing a 4% duty rate simultaneously. The Tribunal ruled in favor of the appellant, allowing the appeals and providing consequential relief.

2. Recovery of CENVAT credit:
Except for one appeal related to a rebate claim, all other appeals pertained to the demand raised for the recovery of CENVAT credit. The appellant in one appeal had filed a rebate claim for the refund of duty paid, which was initially granted but later directed to be repaid by the Commissioner (Appeals). The appellant argued that the rebate claim was correctly sanctioned as duty was paid on the exported cotton yarn. The Tribunal noted the erroneous direction to repay the rebate and ruled in favor of the appellant, setting aside the impugned orders.

3. Rebate claim for refund of duty paid:
The appellant in one specific appeal challenged the order directing repayment of the sanctioned rebate along with interest. The appellant contended that the original authority had correctly sanctioned the rebate claim as duty was paid on the exported cotton yarn. The Commissioner (Appeals) had erroneously directed the repayment of the rebate, assuming cotton yarn attracted a nil duty rate. The Tribunal agreed with the appellant's argument and allowed the appeal, stating that the denial of the rebate claim was unjustified.

In conclusion, the Tribunal's judgment resolved the issues related to the duty rate on cotton yarn, recovery of CENVAT credit, and rebate claim for refund of duty paid in favor of the appellant, emphasizing the correct interpretation of the notifications and the eligibility of the credit and rebate claim.