2024 (12) TMI 667 - AT - Central Excise

Refund of CENVAT balance lying as unutilized credit on the date of exercising the option of exemption notification shown in RG23A Part I and II registers since July 2004 - Denial of Refund claim on the ground that the amount had lapsed as per Rule 11(3) of the CENVAT Credit Rules, 2004 - whether the amended Rule 11(3) will apply to the CENVAT credit balance available in the appellant books prior to insertion of Rule 11(3)? HELD THAT - CENVAT schema is in the nature of a benefit/ concession provides for assessee s to avail credit of duty paid on goods and services, as provided for in the statute. The credit accumulated can be set off on final duty to be paid against goods and services. Once the assessee avails of the scheme then rights to avail of the credit accrue to the assessee. Unless the provision of law is specifically modified taking away this right, the assessee cannot be denied the same. In the present case, there are nothing in the amended provision of Rule 11 of CCR, 2004, to show that the intention of the legislature was to effect the existing rights of the assessee s to enjoy the credit already accumulated. In the case of EICHER MOTORS LTD. VERSUS UNION OF INDIA 1999 (1) TMI 34 - SUPREME COURT , it has been held that the rights of credit facilities accrued under existing law are not to be altered. Furthermore, in COLLECTOR OF CENTRAL EXCISE, PUNE VERSUS DAI ICHI KARKARIA LTD. 1999 (8) TMI 920 - SUPREME COURT , the Hon'ble Supreme Court held that ' It should also be noted that there is no corelation of the raw material and the final product, that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available.' The impugned order is set aside and the appeal is allowed.

Summary

Issues:
1. Interpretation of Rule 11(3) of the CENVAT Credit Rules, 2004 regarding the lapse of unutilized CENVAT credit.
2. Applicability of Rule 11(3) to CENVAT credit balance available in the appellant's books prior to the insertion of Rule 11(3).

Analysis:
The appellant, engaged in manufacturing polyester yarn, filed a refund claim for unutilized CENVAT credit of Rs. 29,51,234/- under Notification No. 30/2014-CE. The claim was denied citing Rule 11(3) of the CENVAT Credit Rules, 2004, by the Original Authority and the Commissioner of Central Excise (Appeals). The appellant argued that Rule 11(3) cannot be applied retrospectively as it came into effect from 01/03/2007, relying on various judgments supporting their stance.

The Tribunal analyzed Rule 11(3) which mandates payment equivalent to CENVAT credit if exemption is opted or if the final product is exempted absolutely. The Tribunal noted that the CENVAT scheme allows credit accumulation for future duty payment unless specifically modified. Referring to the judgment in Eicher Motors case, the Tribunal emphasized that rights accrued under existing law should not be altered. The judgment highlighted that the scheme cannot be applied to goods already in existence under the previous rules.

Additionally, the Tribunal cited the Dai Ichi Karkarta Ltd case where the Supreme Court emphasized the indefeasible nature of validly taken credit, not limited by time or correlation to specific products. Based on the legal positions in the cited judgments and the discussions, the Tribunal set aside the impugned order, allowing the appeal and granting the appellant consequential relief as per law.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the protection of accrued rights under the CENVAT scheme and the inapplicability of Rule 11(3) retrospectively, as supported by legal precedents.