2025 (2) TMI 517 - AT - Central Excise

Reversal of CENVAT Credit - fraudulent availment of CENVAT credit - lapse of credit in terms of provisions of Rule11(3) of the CC Rules - HELD THAT - In terms of Rule 11(3) of CENVAT Credit Rules 2004 the credit lying with the assessee as on the date on which the final products have been declared exempt shall lapse. The records of the case do not reveal whether the balance that is sought to be held to have lapsed as on 01.03.2010 was after the reversal made in terms of the OIO dated 22.04.2013 or otherwise. It is also not clear as to how the impugned order holds that the amount of Rs.1, 09, 76, 108/- was reversed. The Show Cause Notice dated 06.04.2011 was about fraudulent availment of CENVAT credit and in case the appellant has reversed the demand confirmed vide Order dated 22.04.2013 it is not understood as to how the credit of Rs.1, 54, 84, 494/- is available as on 27.10.2010 i.e. as on the date of issue of Notification No. 10/2010 dated 27.02.2010. Both the impugned Show Cause Notice dated 27.08.2012 and the other Show Cause Notice dated 06.04.2011 have been issued well beyond 01.03.2010. Revenue in fact had an opportunity to take up both issues in a single Show Cause Notice. Revenue instead of taking a holistic view has confounded the issue further by issuing multiple Show Cause Notices giving rise to the confusion. Conclusion - It is necessary in the interest of justice that the issue as far as the allowing of adjustment/ reversal of CENVAT credit of Rs.1, 09, 76, 108/- is concerned should travel back to the Original Authority to verify as to whether the respondents have reversed the above credit in terms of the Orderin- Original dated 22.04.2013 and if so what was the actual balance lying in credit as on the date of Notification i.e 27.02.2010. Such credit actually lying in balance as on 01.03.2010 shall lapse. Appeal allowed by way of remand.

Summary

The case before the Appellate Tribunal involved the issue of whether the respondent, M/ Surya Pharmaceuticals Ltd., was required to reverse certain CENVAT credits and pay Central Excise Duty. The Revenue contended that the respondent failed to reverse credits and should be liable for duty payments. The Tribunal considered the interpretation of relevant laws and precedents to determine the validity of the Revenue's claims.The core legal questions considered were:1. Whether the respondent was obligated to reverse CENVAT credits in accordance with Rule 11(3) of the CENVAT Credit Rules, 2004.2. Whether the impugned order correctly allowed the adjustment/reversal of certain credits.3. Whether the multiple Show Cause Notices issued by the Revenue created confusion and required further verification.The Tribunal analyzed the relevant legal framework, including Rule 11(3) of the CENVAT Credit Rules, 2004, and precedents such as Choksi Enterprises and Agarwal & Company. The Court interpreted the law to determine the obligations of the respondent regarding the reversal of credits and lapsing of credits under the exemption notification.Key evidence considered included the Show Cause Notices issued by the Revenue, the respondent's reversal of credits, and the impugned order confirming demands for Central Excise Duty and CENVAT credit recovery. The Tribunal scrutinized the conflicting arguments presented by the Revenue and the respondent's representatives.The Court concluded that the issue of allowing adjustment/reversal of a specific CENVAT credit of Rs. 1,09,76,108/- required further verification by the Original Authority. The Tribunal held that the respondent's reversal of credits and the actual balance as of the relevant date needed clarification. The appeal filed by the Revenue was allowed for remand to verify the reversal of credits and the balance as of the critical date.The significant holdings included the Tribunal's decision to remand the issue of CENVAT credit adjustment/reversal for further verification, emphasizing the importance of determining the actual balance of credits as of the relevant date. The Court's interpretation of Rule 11(3) of the CENVAT Credit Rules, 2004, and the application of legal principles from relevant precedents guided the decision-making process.In conclusion, the Tribunal's decision focused on ensuring procedural fairness and accuracy in determining the respondent's obligations regarding CENVAT credits and Central Excise Duty payments. The case highlighted the importance of clear and consistent application of legal principles in tax matters.