2010 (2) TMI 498 - AT - Central Excise

Cenvat/Modvat - whether the un-utilized Cenvat credit of Rs. 22,97,581/- standing to the account of this appellant as on 1-3-2000 in terms of Notification No. 10/2002 dated 1-3-2002 is to be carried forward to meet its consequence in accordance with law subsequently. Show Cause Notice was issued to forfeit the Cenvat credit above lying in the Account of Assessee on the ground that when the credit was unutilised, there is no further right to be carried forward to avail benefit of the same. Held that - right accrued cannot extinguish without mandate of law. In the light of the decision of Rasoi Ltd. v. UOI allow the appeal.

Issues:
1. Whether unutilized Cenvat credit can be carried forward in accordance with law.
2. Impact of Notification No. 10/2002 dated 1-3-2002 on the right to avail unutilized Cenvat credit.
3. Interpretation of Rule 3(2) of Cenvat Credit Rules 2002 regarding the benefit of unutilized credit.
4. Effect of not informing the department about the existence of credit on the right for set off in the future.

Analysis:
1. The central issue in this appeal was whether the unutilized Cenvat credit of Rs. 22,97,581/- could be carried forward in accordance with the law. The Revenue contended that the credit, earned under a duty exemption scheme before 3-1-2002, had lapsed and could not be carried forward. However, the appellant argued that the right to carry forward the credit was not denied by Notification No. 10/2002 dated 1-3-2002. The Tribunal observed that unless a specific statutory provision extinguishes an accrued right, it cannot be denied merely by the construction of a scheme. Referring to a judgment of the Calcutta High Court upheld by the Supreme Court, the Tribunal held that the right to credit does not extinguish on its own volition unless mandated by law. The Tribunal found no provision in the impugned Notification diminishing the past right of the appellant to carry forward the unutilized credit.

2. The impact of Notification No. 10/2002 dated 1-3-2002 on the right to avail unutilized Cenvat credit was a crucial aspect of the case. The appellant argued that the notification did not deny the right to carry forward the credit, while the Revenue contended that the appellant had lost the right due to operating under a different scheme during a specific period. The Tribunal noted that the Notification did not specifically prohibit carrying forward unutilized credit. It emphasized that the right accrued could not be abrogated without a specific statutory provision, and the mere change in scheme did not automatically extinguish the right to credit.

3. Interpretation of Rule 3(2) of Cenvat Credit Rules 2002 regarding the benefit of unutilized credit was also debated. The Revenue argued that the rule prohibited the benefit of unutilized credit when a new scheme came into operation. However, the Tribunal found no specific provision in the rule forfeiting the right of the appellant to carry forward the unutilized credit. It highlighted that the rule was not invoked to deny the appellant's claim to carry forward the credit for further utilization.

4. The effect of not informing the department about the existence of credit on the right for set off in the future was another issue raised. The Revenue contended that the appellant had lost the right for set off by not informing the department about the credit. However, the Tribunal did not find this argument compelling and emphasized that the right to carry forward the unutilized credit could not be denied based on the failure to inform the department. The Tribunal allowed the appeal, stating that there was no specific provision forfeiting the appellant's right to carry forward the unutilized credit, and the claim was undisputed by the Revenue.

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