2013 (11) TMI 849 - AT - Central Excise

Concessional Rate of Duty on Textile Benefit of Exemption Notification No. 29/2004 and 30/2004 Condition of Making separate books of Accounts - Reversal of Cenvat credit as per Notification No. 30/2004 Waiver of Pre-deposit Held that - Appellants have correctly worked out the cenvat credit pertaining to the exempted goods and the same has been reflected in their ER-1 returns. - department is not able to give any records on the basis of which it can be said that there is a short reversal of cenvat credit - in the show-cause notice also it was not taken up by the department that there was any less reversal of cenvat credit and that it is not necessary that cenvat credit should be reversed before the clearance of the goods - Extended period has been made applicable in the present proceedings when the fact of reversal of cenvat credit was reflected in their periodical ER-1 returns filed with the Department - Once the fact of reversal of cenvat credit is indicated in their periodical returns, then it cannot be held that there was any misstatement or suppression with intention to evade Central Excise duty and accordingly extended period cannot be made applicable. Prima facie the department has no basis whatsoever to indicate that appellants have less reversed the cenvat credit with respect to inputs as per the provisions of notification No. 30/2004-CE read with CBEC clarification dt. 28.07.2004 - appellants have made out a prima facie case on time barred because details of reversal of cenvat credit have been duly reflected in their ER-1 returns - Prima facie appellants have made out a case for complete waiver of the demand confirmed against them stay granted.

Issues involved:
1. Interpretation of Notification No. 30/2004-C.E. regarding reversal of cenvat credit for textile manufacturers.
2. Compliance with CBEC circular No. 795/28/2004-CX dated 28.07.2004.
3. Application of extended period for demand show cause notices.
4. Reversal of cenvat credit before clearance of goods.
5. Prima facie case for waiver of confirmed dues.

Detailed Analysis:
1. The main issue in the judgment revolves around the interpretation of Notification No. 30/2004-C.E., which prescribed full exemption to textile fabrics if no cenvat credit was taken on inputs or capital goods used in the manufacture of finished goods. The dispute arose as the appellants did not maintain separate records for the inputs used in manufacturing both dutiable and exempted goods. The Adjudicating Authority issued demand show cause notices for non-compliance with the notification, leading to appeals and stay applications before the CESTAT.

2. The compliance with CBEC circular No. 795/28/2004-CX dated 28.07.2004 was also a crucial aspect of the case. The circular clarified that manufacturers could avail the benefits of multiple notifications simultaneously if separate books of accounts were maintained. The appellants argued that they reversed the cenvat credit pertaining to exported goods periodically, as reflected in their ER-1 returns, but the Adjudicating Authority confirmed the demands based on a verification report and the judgment of the Supreme Court in a related case.

3. Another significant issue was the application of the extended period for demand show cause notices. The Adjudicating Authority invoked the extended period due to alleged non-reversal of cenvat credit before clearance of goods, as required by the notification and the circular. The appellants contested this, citing their compliance with the reversal process and the reflection of these actions in their periodic returns.

4. The requirement of reversal of cenvat credit before clearance of goods was a point of contention between the appellants and the department. The appellants argued that the reversal was done after the export of processed fabrics, and the Adjudicating Authority's reliance on the verification report led to the initial demands. The CESTAT remanded the case back to the Adjudicating Authority for fresh consideration based on the law declared by the Gujarat High Court in similar cases.

5. Lastly, the judgment addressed the prima facie case for waiver of confirmed dues. The CESTAT observed that the appellants had worked out the cenvat credit reversals as required by the notification and circular, with no specific allegation of short reversal. The lack of basis for the department's claim of less reversal, coupled with the reflection of credit details in ER-1 returns, led to the grant of stay against the recovery of confirmed dues, indicating a potential case for complete waiver based on the appellants' compliance and documentation.

← Previous Next →