2024 (2) TMI 960 - AT - Central Excise

Demand of unutilized carried forward Cenvat balance invoking the Rule 11(3) (ii) of the Cenvat Credit Rules, 2004 - denial of carrying forward of balance credit on the ground that the same shall stand lapsed as the appellant have opted for simultaneous benefits under notification no. 29/2004 30/2004-CE - HELD THAT - As submitted the Appellant has maintained separate records, however the adjudicating authority without verifying the said fact demanded the Cenvat of unutilsed balance while opting for exemption notification No. 30/2004-CE by invoking the Rule 11(3)(ii) of Cenvat Credit Rules, 2004. From the careful reading of the Rule 11(3), it makes clear that the sub Rule (3)(i) covers the goods that are exempt conditionally whereas sub Rule (3)(ii) would apply to those goods to which exemption under Section 5A of the Central Excise Act, 1944 is granted absolutely. The said rule provides that in any case, the Cenvat credit on stock of input lying in stock, in process and contained in finished goods needs to be reversed however, as regard the balance Cenvat credit after such reversal shall lapse only in a case where the exemption notification is absolute. In the present case, notification no. 30/2004-CE is not an absolute notification - Since the above condition contained in the notification No.30/04-CE, in such case in terms of clause (ii) of Rule 11(3) of Cenvat Credit Rules, 2004, the provision of lapsing of balance Cenvat credit will not be applicable. This issue has been considered in a catena of judgments which are cited by the appellant. However it is observed that the lower authority confirmed the demand of unutilized carried forward Cenvat balance only invoking the Rule 11(3) (ii) of the Cenvat Credit Rules, 2004 but not properly verified the factual aspects such as whether appellant have reversed the credit in respect of stocks as provided under Rule 11(3)(i) of the Rules, 2004, the claim of the appellant maintaining separate records and not availing the Cenvat credit on the input used in the goods cleared under Notification No. 30/2004-CE, etc. therefore we are of the view that the matter needs to be reconsidered. The impugned order is set aside. Appeals are allowed by way of remand to the adjudicating authority.

Summary

Issues involved:
The issues involved in the judgment are related to the carrying forward of Cenvat credit balance, the applicability of Rule 11(3)(ii) of the Cenvat Credit Rules, 2004, and the interpretation of notifications No. 29/2004-CE and 30/2004-CE.

Carrying Forward of Cenvat Credit Balance:
The Appellant, engaged in the manufacture of specific products, opted for availing the benefit of notifications No. 29/2004-CE and 30/2004-CE. A show cause notice was issued contending that the Cenvat credit balance carried forward should have lapsed due to simultaneous benefits under the notifications. The lower authorities confirmed the demand, including interest and penalties. The Appellant argued that they maintained separate records and were entitled to retain the balance credit.

Applicability of Rule 11(3)(ii) of Cenvat Credit Rules, 2004:
The adjudicating authority invoked Rule 11(3)(ii) of the Cenvat Credit Rules, 2004, which requires the payment of an amount equivalent to the Cenvat credit if opting for exemption, and the balance credit, if any, to lapse. The Appellant argued that their case did not fall under this rule as they were availing simultaneous benefits under the notifications. The Tribunal noted that the lower authorities did not properly verify factual aspects and the matter needed reconsideration.

Interpretation of Notifications No. 29/2004-CE and 30/2004-CE:
The Appellant relied on Circulars and judgments to support their contention that simultaneous availment of notifications No. 29/2004-CE and 30/2004-CE was allowed. They also argued that the balance Cenvat credit would not lapse based on the conditions of the notifications. The Tribunal agreed with the Appellant's interpretation and set aside the impugned order, allowing the appeals by way of remand to the adjudicating authority for further consideration.