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2023 (7) TMI 1236 - AT - Central ExciseReversal of CENVAT credit - New exemption from duty - Recovery of CENVAT credit with interest and penalty - case of the department is that while availing the exemption Notification No. 30/2004- CE dated 09.07.2004, the appellant was not entitled to utilize the cenvat credit lying unutilized after reversal - HELD THAT - As per the clause (i) of Section 11 (3), assessee who opts for exemption is required to reverse the credit on input, input in process and input contained in the finished goods. As per the clause (ii) of Section 11 (3) if the assessee avail an absolute exemption notification in that case the remaining unutilized amount after reversal in terms of clause (i) shall stand lapse. As per the above provision, only in a case where the exemption which is opted for, if it is absolute exemption, the remaining amount of cenvat credit after reversal as per clause (i) shall lapse, whereas if the exemption is not absolute only requirement is to reverse the credit attributed to input as such, input in process and input contained in the finished goods lying on the date of opting of exemption notification. In the present case since the Notification No. 30/2004-CE is undisputedly a conditional one therefore clause (ii) of the Rule 11 (3) is not applicable. Consequently the remaining amount of unutilized cenvat credit shall not lapse. In this case the appellant has utilized an amount of Rs. 4,42,539/- out of unutilized cenvat credit which is not barred under any of the provision. In the case of SYNFAB SALES AND INDUSTRIES LTD VERSUS C.C.E S.T. -SILVASA 2022 (1) TMI 259 - CESTAT AHMEDABAD , this Tribunal dealing with the absolutely identical issue held that The issue has been considered by the tribunal time and again and after interpreting Rule 11(3) (i) and (ii) came to conclusion that in case of conditional notification the assessee is not required to lapse the remaining credit after reversal on input as such, input in process and input contained in finished goods. The issue is no longer res-integra. Accordingly, the impugned order is set aside - Appeal allowed.
Issues Involved:
1. Disallowance and recovery of CENVAT credit. 2. Recovery of interest and penalty. 3. Utilization of unutilized CENVAT credit after availing exemption. Summary: Disallowance and Recovery of CENVAT Credit: The appellant was issued a show cause notice on 15.12.2011 proposing to disallow and recover CENVAT credit of Rs. 4,42,539 under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11A(1) of the Central Excise Act, 1944. The department contended that the appellant, while availing Notification No. 30/2004-CE, was not entitled to utilize the unutilized CENVAT credit after reversal. The Adjudicating Authority confirmed the demand, which was upheld by the Commissioner (Appeals). The appellant argued that the issue was settled in various judgments, asserting that the unutilized CENVAT credit could be utilized as the exemption was conditional. Recovery of Interest and Penalty: The show cause notice also proposed to recover interest under Rule 14 of CENVAT Credit Rules, 2002 read with erstwhile Section 11AB of the Central Excise Act, 1944, and an equal penalty amounting to Rs. 4,42,539 under Rule 15(2) of CENVAT Credit Rules, 2004 read with Rule 25 of Central Excise Rules, 2002. The Adjudicating Authority and Commissioner (Appeals) upheld the interest and penalty. Utilization of Unutilized CENVAT Credit: The Tribunal found that Notification No. 30/2004-CE is conditional and not absolute, as per Rule 11(3) of CENVAT Credit Rules. Clause (ii) of Rule 11(3) applies only when the exemption is absolute, leading to the lapse of remaining unutilized CENVAT credit. Since the exemption in question was conditional, the remaining unutilized CENVAT credit did not lapse. The Tribunal cited various judgments, including Synfab Sales & Industries Ltd, Orient Syntex, Patodia Filaments Pvt. Ltd., and others, supporting the appellant's position that the balance credit shall not lapse under a conditional exemption. Conclusion: The Tribunal set aside the impugned order and allowed the appeal, affirming that the issue is no longer res-integra and the remaining unutilized CENVAT credit under a conditional exemption notification does not lapse. The appeal was allowed with consequential reliefs.
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