2018 (8) TMI 404 - AT - Central Excise

CENVAT Credit - inputs used in manufacture of exempted as well as dutiable biscuits - the proportionate credit on exempted biscuits reversed - Held that - There is no dispute about the reversal of Cenvat credit relatable to inputs which stand utilized in the manufacture of exempted final products - It stands held in number of decisions of the higher courts that such reversal of credit would lead to a situation as if no credit was ever availed. Inasmuch as the appellant have admittedly reversed the credit, there are no reasons to uphold the impugned orders directing them to pay 10% of the value of the exempted product - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat credit on duty paid raw materials for manufacturing biscuits with different RSPs.
2. Interpretation of Rule 6(3)(iii) regarding payment for exempted biscuits post 01/03/2007.
3. Dispute over reversal of Cenvat credit and requirement to pay 10% of the value of exempted goods.
4. Applicability of case law on reversal of credit leading to no credit ever availed.

Analysis:
1. The appellant was manufacturing biscuits with different RSPs and availing Cenvat credit on duty paid raw materials used for both types of biscuits. Post 01/03/2007, biscuits with RSP less than &8377; 50/- per Kg became exempted.

2. The Revenue demanded payment of 10% of the value of exempted biscuits under Rule 6(3)(iii) due to availed Cenvat credit on raw materials. The appellant contended they had reversed a proportionate credit and should not be liable for payment.

3. The Lower Authorities disagreed with the appellant's contention, leading to the present appeal. However, the Tribunal noted that the reversal of Cenvat credit for inputs used in exempted final products should be treated as if no credit was ever availed, as per established legal principles.

4. Citing the Supreme Court decision in Chandrapur Magnet Wires Pvt. Ltd. case, the Tribunal emphasized that reversal of credit equates to no credit availed. Referring to other Tribunal judgments, the Tribunal concluded that since the appellant had reversed the credit, there was no basis to uphold the orders directing payment for exempted products.

5. Therefore, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, providing consequential relief. The decision was based on the principle that reversal of credit nullifies the availed credit, aligning with established legal precedents and interpretations of relevant provisions.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, the legal interpretation applied by the Tribunal, and the final decision rendered in the case.