2019 (1) TMI 310 - AT - Central Excise

CENVAT Credit - unutilized balance of Cenvat Credit lying in the credit account - N/N. 30/2004 dated 09.07.2014 denied - contravention of provision of Rule 11(3)(i) & (ii) of Cenvat Credit Rules - denial of benefit of notification on the ground that they had not struck off balance of Cenvat credit lying in their account at the time of opting for the exemption from the whole of the excise duty - Held that - Identical issue decided in the case of M/S. WEARIT GLOBAL LTD. VERSUS C.C.E., UDAIPUR 2018 (8) TMI 1094 - CESTAT NEW DELHI , where it was held that As per Rule 11 (3)(ii) CCR, Cenvat Credit balance will lapse only if the product is exempted absolutely under Section 5A of Central Excise Act. But since the Notification No. 30/2004-CE dated 09.07.2004 is a conditional notification, hence only Rule 11 (3)(i) of CCR would apply which does not mandate any such lapsing. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Applicability of Rule 11(3)(i) & (ii) of Cenvat Credit Rules, 2004
- Denial of exemption for unutilised Cenvat credit balance
- Contravention of provisions leading to Show Cause Notice
- Interpretation of Notification No. 30/2004-CE
- Legal footing of impugned order

Analysis:
1. Applicability of Rule 11(3)(i) & (ii) of Cenvat Credit Rules, 2004:
The appellant, engaged in manufacturing manmade fabrics, availed Cenvat credit on inputs. The issue arose when the department sought to deny exemption for the unutilised Cenvat credit balance as of 1st April 2014, citing contravention of Rule 11(3)(i) & (ii) of Cenvat Credit Rules. The Show Cause Notice proposed lapsing of the credit amount and penal action under Rule 15(1) of Credit Rules.

2. Denial of exemption for unutilised Cenvat credit balance:
The appellant argued for exemption based on Notification No. 30/2004-CE, emphasizing a previous Tribunal decision supporting their position. The Department supported the impugned order but acknowledged the issue was settled per the Tribunal's prior ruling.

3. Contravention of provisions leading to Show Cause Notice:
The Tribunal reviewed various decisions and observed that the appellant's case aligned with the decision in Jansons Textile Processors vs. Commissioner, Central Excise & ST Salem. The appellant's choice for exemption under a conditional notification meant Rule 11(3)(i) applied, not mandating lapsing of the credit balance.

4. Interpretation of Notification No. 30/2004-CE:
The Tribunal referenced the decision of CESTAT-Chennai, highlighting the distinctiveness of sub-rules 3(i) and 3(ii) of Rule 11. The legislative intent was deemed to treat these sub-rules as separate alternatives with different conditions, supporting the appellant's position for exemption.

5. Legal footing of impugned order:
Ultimately, the Tribunal concluded that the impugned order's findings were not legally sound, requiring it to be set aside. Relying on previous decisions and analyzing the facts, the Tribunal allowed the appeal, applying the same ratio as in the referenced cases.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, legal interpretations made, and the final decision reached by the Tribunal, ensuring a detailed understanding of the case.