2019 (7) TMI 953 - AT - Central Excise

Reversal of CENVAT Credit - common inputs - Appellant was clearing their final product to Mega Power Project under the claim of exemption in terms of Notification Number 6/2006-CE dated 01/03/2006 - Revenue entertained a view that they are required to pay 6% of the value of the said goods in terms of Rule 6(3) of the Cenvat Credit Rules, 2004, as they were availing Cenvat Credit on common inputs - HELD THAT - Admittedly, the N/N. 6/2006 continued to cause appearance in Sub-Rule 6(6)(vii) even though the same was not in force during the relevant period and it seems that the said mistake was realized by the legislature only on 08/05/2012 and vide N/N. 25/2012, the subsequent exemption N/N. 12/2012 was introduced in the said rule. In the present case, it is not even a case of re-introduction of exemption notification. Exemption continued in as much as with the rescinding of Notification No. 6/2005, the subsequent Notification 12/2012 was immediately introduced. It is only in the provisions of Rule 6(6)(vii) of the Cenvat Credit Rules, which are to the effect that there would be no requirement of reversal of any amount in case of the goods cleared under the exemption to Mega Power Project, N/N. 6/2006 was not replaced with N/N. 12/2012 - This inadvertent mistake stands clarified by the Board vide their clarification letter F. No. 267/49/2013-CX.8 dated 30th June, 2015. Thus, it is N/N. 12/2012, which was to be read in the provisions Rule 6(6)(vii) of the Cenvat Credit Rules. In as such a scenario there would not be any requirement of reversal of any amount, in terms of the provisions Rule 6(3). Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of exemption notification under the Central Excise Tariff Act for goods supplied to Mega Power Project; Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 during the transition between two notifications.

Analysis:
The case involved the appellant engaged in manufacturing furniture and parts under Chapter 94 of the Central Excise Tariff Act, clearing goods to Mega Power Project under an exemption notification. The dispute arose when a new notification replaced the existing one, leading to confusion regarding the applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 during the transition period. The Revenue argued that the appellant should pay 6% of the value of exempted goods cleared to the Mega Power Project due to the absence of the old notification in the rule during the relevant period.

The Tribunal noted that the mistake of referencing the old notification in the rule during the transition period was rectified later, as clarified by the Central Board of Excise and Customs. The Board's clarification highlighted that the intention was not to deprive the industry of the benefit under the new notification during the interim period. Citing previous Supreme Court judgments, the Tribunal emphasized that inadvertent errors in exemption notifications should be rectified retrospectively to uphold consistent government policies.

Ultimately, the Tribunal agreed with the appellant's argument that the new notification should be read in the provisions of Rule 6(6)(vii) of the Cenvat Credit Rules, absolving the appellant from the requirement of reversal of any amount under Rule 6(3). Considering the unintentional mistake in the legislative reference and the continuous exemption granted to the goods supplied to Mega Power Project, the Tribunal set aside the impugned order, allowing the appeal with consequential relief to the appellant.

In conclusion, the judgment clarified the interpretation of exemption notifications and the application of Cenvat Credit Rules during the transition between notifications, emphasizing the need to rectify unintended errors to uphold the benefits intended for the industry.