2018 (8) TMI 733 - AT - Central Excise

Reversal of Cenvat Credit while opting for SSI exemption - demand of credit attributable to inputs, semi finished goods and finished goods lying in stock on the date of opting for the exemption under N/N. 8/2003-CE dated 01.03.2003 - Rule 11(3) of Cenvat Credit Rules, 2004 - Held that - The assessee is require to reverse the cenvat credit lying in their cenvat credit account on the date of opting for exemption on the inputs, semi finished goods and finished goods lying in stock on the date of opting for exemption. But the said provision does not provide that an assessee is required to pay the amount of cenvat credit in cash, if, no balance is lying in cenvat credit account - The provision of Rule 11(3) of the Rules are only the purpose that if assessee is opting for exemption, in that case assessee is required to reverse the cenvat credit on inputs, semi finished goods and finished goods lying in stock on the date of opting for exemption. It has also been provided that if exemption is absolute, in that case balance in cenvat credit after reversal, shall lapse, so provisions of Rule 11(3) are only transitional provision. As there is no balance in cenvat credit account, in that circumstances, the appellant are not required to pay cenvat credit in cash for inputs, semi finished goods and finished goods lying in stock as on 01.04.2012 - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellants are required to pay cenvat credit in cash on inputs, semi-finished goods, and finished goods when opting for exemption under Notification No. 8/2003-CE dated 01.03.2003?

Analysis:
The appellants appealed against an order directing them to pay cenvat credit on inputs, semi-finished goods, and finished goods in stock upon opting for exemption under Notification No. 8/2003-CE. The Revenue contended that payment was mandatory under Rule 11(3) of the Cenvat Credit Rules, 2004. The appellant argued that Rule 11(3) did not mandate cash payment, citing precedents. The Tribunal noted that Rule 11(3) required reversing cenvat credit but did not specify cash payment if no balance existed. Precedents supported the appellant's contention, emphasizing the transitional nature of Rule 11(3) and the lapse of credit post-reversal. The Tribunal referenced cases like Sundeep Electrodes Pvt. Ltd. and C.N.C. Comercial Ltd. to support the appellant's position.

The Revenue opposed citing the period of the precedents and argued for payment based on Rule 11(3). However, the Tribunal found that the precedents, despite being prior to 2007, correctly interpreted Rule 11(3) by not requiring cash payment when no balance existed. The Tribunal also referred to a case involving Ergan Plastics Industries, where a similar conclusion was reached. Consequently, the Tribunal set aside the impugned orders and allowed the appeals, providing consequential relief to the appellants.