2023 (1) TMI 1044 - AT - Central Excise

Reversal of CENVAT Credit - seeking permission to retake credit of wrongly reversed amount - case of Revenue is that the amount was correctly reversed under Rule 6 (3) of CCR as the option once exercised to reverse amount in terms of Rule 6 cannot be changed during the financial year - HELD THAT - The fact is not under dispute that the appellant s products namely, Colour Positive Unexposed Cinematographic Film became exempted vide notification No. 33/2011-CE dated 25.06.2011. In case of goods became exempted for the purpose of cenvat, the procedure prescribed under Rule 11(3) need to be followed - From the provision of said section, it is clear that in case of any dutiable goods became exempted, the assessee is required to reverse the cenvat credit in respect of inputs lying in stock or in process or is contained in the final product as of date of opting for the exemption notification. In terms of above specific provision, the appellant is required to reverse the credit attributed to inputs as such, in process, contained in finished gods, therefore, the appellant have mistakenly reversed 5% in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004. As per the specific provision particularly in a case that the goods which were earlier dutiable and at interim stage became exempted, the provision which predominantly apply is Rule 11(3) of Cenvat Credit Rules, 2004. According to which the appellant is required to reverse the cenvat credit attributed to the input, in process and/ or contained in finished goods. The appellant have made good even though at a later stage by reversing the amount of Rs. 5,40,069/- therefore, the reversal of 5% made by the appellant is an excess reversal which need to be recredit/ refunded to the appellant. In the present case, the fact is different inasmuch as the dutiable goods became exempted for which Rule 11(3) is applicable, therefore, the Circular in the peculiar facts of the present case is not applicable. Moreover, in catena of decision, it was held that giving options for availing a particular option is procedural requirement and on failure of the same, the assessee cannot be deprived of choosing any of the option available in Rule 6(3) and one of the option is reversal of proportionate credit - the appellant s excess reversal of Rs. 3,24,664/- required to be refunded/re-credit. The appellant is entitled for re-credit/ refund of Rs. 3,24,664/- and interest thereupon, if any, as per law - Appeal allowed.

Summary

Issues:
1. Reversal of cenvat credit under Rule 6(3)(i) of CCR
2. Permission for re-credit/refund of reversed amount
3. Interpretation of Rule 11(3) of Cenvat Credit Rules, 2004
4. Applicability of Circular No. 868/6/2008-CX
5. Procedural requirements for availing options under Rule 6(3)

Analysis:
1. The appellant, engaged in manufacturing photographic products, reversed cenvat credit under Rule 6(3)(i) of Cenvat Credit Rules (CCR) following an exemption notification. They later sought permission to re-credit the reversed amount. The department contended that once the option under Rule 6 is exercised, it cannot be changed during the financial year. A Show Cause Notice was issued, leading to rejection of the application by the Adjudicating Authority.

2. The appeal was filed challenging the rejection, arguing that the correct procedure was to reverse cenvat credit attributed to inputs, work-in-progress, and finished goods as per Rule 11 of CCR. The appellant claimed to have corrected the mistake by reversing the correct amount on stock of exempted goods, including those cleared post-exemption notification. The appeal sought reversal of the excess amount reversed initially.

3. The Tribunal analyzed Rule 11(3) of Cenvat Credit Rules, 2004, which mandates the reversal of cenvat credit on inputs, work-in-progress, and finished goods as of the exemption notification date. It noted that the appellant had mistakenly reversed 5% under Rule 6(3)(i) but later rectified by reversing the correct amount on all relevant stock. The Tribunal found the excess reversal eligible for re-credit/refund as per Rule 11(3), distinguishing it from the Circular cited by the Revenue.

4. The Revenue relied on Circular No. 868/6/2008-CX, arguing against the re-credit/refund based on the initial reversal under Rule 6(3). However, the Tribunal held that the Circular was not applicable in this case where Rule 11(3) governed the reversal requirements for goods transitioning from dutiable to exempted status. The Tribunal emphasized the procedural nature of availing options under Rule 6(3) and upheld the appellant's right to seek re-credit/refund.

5. Ultimately, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant re-credit/refund of the excess amount reversed. The decision was based on the correct application of Rule 11(3) and the procedural flexibility afforded to the appellant in choosing the appropriate cenvat credit reversal option.