2024 (5) TMI 849 - AT - Central Excise

Reversal of accumulated Cenvat credit under Rule 11 (3) of Cenvat Credit Rules 2004 - lapse of accumulated unutilized Cenvat credit balance by availing N/N. 30/2004-CE in terms of Rule 11 (3) of Cenvat Credit Rules 2004 - manufacture of excisable goods texturized polyester yarn falling under 5402 of the first schedule of tariff act 1985 and is availing Cenvat credit under Cenvat Credit Rules 2004 - HELD THAT - From the Rule 11 (3) (ii) it can be seen that the provision of lapsing of credit is applicable only in the case where the assessee avails the absolute exemption notification. In the present case the respondent has admittedly availed the exemption Notification No. 30/2004- CE - the Notification No. 30/2004-CE is not absolute notification but is it is a conditional one. Therefore the provision of lapsing of the accumulated unutilized credit as provided under Rule 11 (3) (ii) of Cenvat Credit Rules 2004 is not applicable in the facts of the present case. This issue has been considered time and again in various judgments. This Tribunal in the case of Welspun India Ltd 2023 (8) TMI 177 - CESTAT AHMEDABAD where it was held that the appellant is neither liable to reverse the accumulated Cenvat credit of ADE (T TA) nor the demand of the same is sustainable. Thus it was held that the assessee is not required to reverse the accumulated Cenvat credit under Rule 11 (3) of Cenvat Credit Rules 2004 when the conditional notification is availed. The order passed by the Learned Commissioner (Appeals) is legal and correct and does not require any interference there in - the impugned order is upheld - Revenue s appeal is dismissed.

Summary

Issues Involved:
1. Whether the accumulated Cenvat credit should lapse when the respondent avails exemption Notification No. 30/2004-CE, which is conditional and not absolute.

Judgment Summary:

Issue 1: Applicability of Rule 11(3) of Cenvat Credit Rules, 2004 on lapsing of Cenvat credit when availing a conditional exemption notification.

The respondents were engaged in the manufacture of texturized polyester yarn and claimed exemptions under Notification No. 29/2004-CE and Notification No. 30/2004-CE. The department contended that the respondent was only availing Notification No. 30/2004-CE, and under Rule 11(3) of Cenvat Credit Rules, 2004, the accumulated Cenvat credit should lapse as the final product was exempted under Section 5A of the Central Excise Act.

The Revenue argued that the unutilized balance of credit should lapse as per Rule 11(3)(ii) since the respondent opted for an exemption notification. However, the respondent's counsel argued that Notification No. 30/2004-CE was conditional, not absolute, thus the credit should not lapse. They supported their argument with various judgments including Arvind Ltd, Welspun India Ltd, Dai Ichi Kankaria Ltd, and M/s. Hershey India Pvt Ltd, which held similar views.

The Tribunal examined Rule 11(3)(ii) and noted that the lapsing of credit applies only if the exemption notification availed is absolute. Since Notification No. 30/2004-CE was conditional, the provision for lapsing of credit was not applicable. The Tribunal cited the decision in Welspun India Ltd, which clarified that Rule 11(3) does not have retrospective effect and cannot be applied to credits accumulated before its enactment unless the exemption notification is availed after the rule came into effect.

The Tribunal upheld the order of the Learned Commissioner (Appeals), confirming that the accumulated Cenvat credit should not lapse as the exemption notification availed by the respondent was conditional. The Revenue's appeal was dismissed, and the impugned order was maintained as legal and correct.

Conclusion:
The Tribunal concluded that the respondent is not required to reverse the accumulated Cenvat credit under Rule 11(3) of the Cenvat Credit Rules, 2004, as the exemption notification availed was conditional, not absolute. The appeal by the Revenue was dismissed, upholding the decision of the Commissioner (Appeals).