2005 (12) TMI 18 - AT - Central Excise

Central Excise Modvat credit Credit obtain and utilized prior to finishing product became exempted require not be reversed on inputs still lying in stock

Summary

Issues:
Revenue appealing against Orders-in-Appeal passed by Commissioner of Central Excise (Appeals) regarding reversal of Cenvat credit on exempted final products.

Analysis:
The respondents, manufacturers of fruit pulp/concentrate, were availing Cenvat credit on inputs/packing material even after the final products were exempted from duty. The Revenue sought reversal of the irregularly utilized Cenvat credit. The original authority accepted respondents' contentions based on precedents. Revenue appealed, but the First Appellate Authority upheld the lower authority's decision citing a Tribunal case confirmed by the Apex Court. Revenue contested the Orders-in-Appeal on various grounds, including the applicability of Modvat rules and conflicting Supreme Court decisions.

The Tribunal noted the unresolved issue due to conflicting Supreme Court decisions on reversing Cenvat credit for exempted products. Referring to the Apex Court's dictum, the Tribunal emphasized that validly taken credit need not be reversed when final products become exempted. The Tribunal upheld the Orders-in-Appeal, stating that the credit already utilized need not be reversed based on the Larger Bench's decision, prevailing over a Two-Members Bench's decision. The Tribunal dismissed Revenue's appeals, affirming the Commissioner (Appeals) decision.

In conclusion, the Tribunal upheld the Orders-in-Appeal, emphasizing the validity of Cenvat credit taken and utilized even after the final products were exempted. The conflicting Supreme Court decisions and the application of Modvat rules were considered, with the Tribunal following the precedent set by the Larger Bench's decision. The judgment highlights the importance of validly taken credit and its indefeasibility, leading to the dismissal of Revenue's appeals.