2012 (11) TMI 957 - HC - Central Excise

Reversal of Cenvat Credit - goods exempted after availing cenvat credit on Inputs - Held that - Manufacturer is not required to reverse/pay the amount equivalent to the CENVAT credit taken by him in respect of inputs which are proved to have been used in the manufacture of goods which have been cleared under exemption from excise duty. - As decided by Court in case of COMMISSIONER OF C. EX., CHANDIGARH Versus SABOO ALLOYS PVT. LTD. 2009 (12) TMI 125 - HIGH COURT OF HIMACHAL PRADESH even though the final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Cenvat credit already taken by him - Decided in favour of Assessee.

Summary

Issues:
Whether a manufacturer is required to reverse/pay the amount equivalent to the CENVET credit taken in respect of inputs used in the manufacture of goods cleared under exemption from excise duty.

Analysis:
The judgment in question pertains to the issue of whether a manufacturer must refund or repay the credit of central value added tax obtained on raw materials and inputs when the final product is exempted from excise duty. The court considered the specific provisions of Rule 6(1) of CENVAT Credit Rules, 2002, along with Explanation II to Rule 6(3), which state that no credit can be taken for inputs used in the manufacture of exempted goods. The court heard arguments from both sides, with the standing counsel for the Central Excise Department contending that no credit should be allowed in such cases.

The court referenced previous cases, specifically Commissioner of Central Excise Chandigarh versus Saboo Alloys Private Limited and Commissioner of Central Excise Chandigarh versus United Vanaspati Limited. In these cases, the court had ruled in favor of the assessee and against the Revenue, establishing a precedent that the manufacturer is not required to refund or repay the credit in situations where the final product is exempted from excise duty. As these judgments had attained finality, the present appeal was dismissed based on the legal principles established in the aforementioned cases. No costs were awarded in this matter.

In conclusion, the judgment reaffirms the legal position that a manufacturer is not obligated to reverse or repay the CENVAT credit taken on inputs used in the manufacture of goods that are subsequently exempted from excise duty. The court's decision was based on the interpretation of relevant provisions and the precedent set by previous rulings, providing clarity on this issue in the realm of excise duty regulations.