2015 (2) TMI 600 - AT - Central Excise

Conditional Exemption - Whether reversal of cenvat credit before utilizing would be amount to non availment of credit - benefit of exemption Notification No. 30/04-CE - composite mill manufactured cotton yarn from cotton and used the same within the factory for weaving of fabrics. - Held that - Benefit of the exemption notification is subject to the condition that no duty credit that is taken but the assessee during November and December 2005 had taken Cenvat credit of ₹ 6,622/- in respect of certain inputs and during January to March 2006 had taken Cenvat credit of ₹ 2,753/- in respect of certain inputs. However, the Assessee s claim that this credit had not been utilised and had been reversed as soon as this irregularity was pointed out by the Department is not refuted by the Department. Since the credit taken was reversed without being utilised, in our view, the judgment of Hon ble Allahabad High Court in the case of Hello Minerals Water (P) Ltd. vs. Union of India (2004 (7) TMI 98 - HIGH COURT OF JUDICATURE AT ALLAHABAD) which is based on the Apex court s judgment in the case of Chandrapur Magnet Wires (P) Ltd. vs. CC, Nagpur (1995 (12) TMI 72 - SUPREME COURT OF INDIA) would be applicable to the facts of this case and the Assessee have to be treated as not having taken the Cenvat credit and would be eligible for the exemption benefit. In view of this, the impugned order denying the benefit of exemption Notification No. 30/04-CE and confirming the duty demand on this basis against the Assessee is not sustainable and the same is set aside. - Decided against Revenue.

Issues Involved:
1. Eligibility for benefit of exemption Notification No. 30/04-CE.
2. Reversal of Cenvat credit on packing material.
3. Denial of cum duty benefit.
4. Imposition of penalty.

Eligibility for benefit of exemption Notification No. 30/04-CE:
The case involved appeals by M/s JCT Limited and the Revenue regarding the denial of duty exemption under Notification No. 30/04-CE due to the Assessee taking Cenvat credit on packing material during specific periods. The Assessee manufactured cotton yarn for internal use and captive clearances, availing duty exemption under the said notification. The dispute arose when the Department contended that even though the Assessee reversed the Cenvat credit on packing material, they would not be eligible for the exemption benefit. The original Adjudicating Authority confirmed duty demands, denied the exemption, allowed cum duty benefit, and imposed a penalty. The Commissioner (Appeals) upheld the duty demand but set aside the penalty and disagreed with the denial of cum duty benefit. Both parties appealed against the Commissioner's orders.

Reversal of Cenvat credit on packing material:
The core issue revolved around whether the Assessee could avail the benefit of Notification No. 30/04-CE despite reversing the Cenvat credit taken on packing material during the disputed periods. The Assessee argued that once the credit was reversed without utilization, they should be considered as not having availed the credit, citing relevant judgments. The Department contended that the exemption was not available once Cenvat credit had been taken, regardless of subsequent reversal. The Tribunal analyzed the facts, noting that the Assessee had indeed reversed the credit promptly upon detection of the irregularity. Relying on legal precedents, the Tribunal concluded that the Assessee should be treated as not having taken the Cenvat credit and thus eligible for the exemption benefit. Consequently, the Tribunal set aside the duty demand, rendering the appeals by the Revenue on cum duty benefit and penalty irrelevant.

Denial of cum duty benefit:
The issue of denying cum duty benefit arose in the context of treating the sale price of yarn as inclusive of excise duty and allowing an abatement. The original Adjudicating Authority permitted the cum duty benefit, which the Revenue challenged before the Commissioner (Appeals). The Commissioner upheld the duty demand but disagreed with the Revenue's plea to disallow the cum duty benefit. The Tribunal did not delve deeply into this issue as the primary contention regarding the eligibility for exemption under Notification No. 30/04-CE was resolved in favor of the Assessee, leading to the dismissal of Revenue's appeals on this aspect.

Imposition of penalty:
Regarding the imposition of a penalty on the Assessee, the original Adjudicating Authority had levied a penalty along with confirming the duty demand. However, the Commissioner (Appeals) set aside the penalty. As the Tribunal ruled in favor of the Assessee on the core issue of exemption eligibility, the penalty issue became moot, and no further analysis or decision was required on this aspect.

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