2009 (8) TMI 521 - AT - Central Excise

Cenvat Credit- inputs- Notification No. 50/2003, dated 10-6-03- The appellants manufacture steel wires coated and uncoated, stay stranded wire, barbed wire and started availing the benefit of Notification No. 50/2003, dated 10-6-03 with effect from 30-10-04. The proceedings were initiated to order recovery of Cenvat credit of Rs.3,18,763/- attributable to inputs , inputs contained in the semi-finished or finished goods on which credit was availed and utilised and which were lying in the factory as closing stock as on 30-10-04. The original authority confirmed the demand and imposed penalty. Commissioner (Appeals) upheld the order of the original authority. In the light of the various decisions held that- On perusal of the Rule 6 of Rules 2002 and the corresponding Rules, as mentioned above, we are of the view that the Appellants had correctly taken the credit and utilised, when the final product was dutiable and there is no requirement to reverse the credit on final product becoming exempt and such credit cannot be recovered under Rule 12 of Rules 2002 corresponding to Rule 57-I, 57AH of Rules 1944. The facts of the present case are substantially the same as the facts in the case of Purewal Associates Ltd. In the light of the above, I find merit in the appeal by the party. Accordingly, I set aside the orders of the lower authorities and allow the appeal with consequential relief.

Summary

Issues:
Appeal against order of Commissioner (Appeals) regarding recovery of Cenvat credit under Notification No. 50/2003 dated 10-6-03.

Analysis:
1. The appellants manufactured various steel products and availed benefits under Notification No. 50/2003 dated 10-6-03. The issue revolved around the recovery of Cenvat credit amounting to Rs.3,18,763/- attributable to inputs contained in finished goods as closing stock on 30-10-04.

2. The appellant's representative argued that a similar issue under the same notification was previously decided in their favor by the Tribunal. They also cited a relevant case law to support their position.

3. The Respondent's representative contended that once goods are exempted, the question of allowing credit on inputs does not arise, citing Supreme Court and Tribunal decisions to support their argument.

4. The Tribunal analyzed the submissions from both sides. It noted that the decision cited by the Respondent had been overruled by a Larger Bench decision. The Tribunal clarified that if credit was legally taken and utilized, there was no basis for recovery, even for inputs lying as such.

5. The Tribunal referred to the decision of a Larger Bench in a specific case, highlighting that the right to utilize credit against future liability becomes indefeasible if there was no illegality in taking the credit initially.

6. Considering the precedents and the facts of the case, the Tribunal found merit in the appellant's appeal. Consequently, it set aside the lower authorities' orders and allowed the appeal with consequential relief.