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2015 (9) TMI 881 - SC - Central ExciseReversal of Credit under Rule 6 - credit taken on denatured spirit - CENVAT Credit which was already accumulated in favour of the assessee at the time when the Rules,2002 were brought into force. - Utilization of the major portion of the credit was denied to the assessee by the Adjudicating Authority invoking the provisions of Rule 6 of the Rules,2002 - Held that - CENVAT Credit which was already earned by the assessee, could not have been taken away if the rigors of Rule 6 would be having only prospective effect. - no doubt that the view of the Tribunal is perfectly justified and does not call for any interference - Decided against Revenue.
Issues Involved:
1. Utilization of accumulated CENVAT Credit under CENVAT Credit Rules, 2001 after the introduction of CENVAT Credit Rules, 2002. 2. Applicability and interpretation of Rule 6 and Rule 9 of the CENVAT Credit Rules, 2002. 3. Prospective vs. retrospective application of Rule 6 of the CENVAT Credit Rules, 2002. Detailed Analysis: 1. Utilization of Accumulated CENVAT Credit: The core issue pertains to whether the CENVAT Credit accumulated by the assessee under the CENVAT Credit Rules, 2001 can be utilized after the introduction of the CENVAT Credit Rules, 2002. The assessee had two units: one for manufacturing sugar and molasses and another for distilling denatured spirit (dutiable) and rectified spirit (non-dutiable). The assessee was granted a single license for both units, which were located on the same premises. 2. Applicability and Interpretation of Rule 6 and Rule 9: The crux of the dispute revolves around the interpretation of Rule 6 and Rule 9 of the CENVAT Credit Rules, 2002. Rule 9, a transitional provision, states that any unutilized credit earned under the CENVAT Credit Rules, 2001 shall be allowable under the 2002 Rules and can be utilized accordingly. The Revenue argued that Rule 6, which prohibits CENVAT Credit on inputs used in the manufacture of exempted goods, should apply to the utilization of the accumulated credit. The Tribunal, however, held that Rule 6 should be applied prospectively and does not affect the credit already earned under the previous rules. The Tribunal emphasized that Rule 9 explicitly allows the utilization of previously accumulated credit, and Rule 6 only restricts credit availability under the new rules. 3. Prospective vs. Retrospective Application of Rule 6: The Tribunal's interpretation, which the Supreme Court upheld, was that Rule 6 of the CENVAT Credit Rules, 2002 must be given prospective effect. This means that the restrictions on credit utilization imposed by Rule 6 apply only to credits earned after the enforcement of the 2002 Rules and do not affect credits accumulated under the 2001 Rules. The Supreme Court agreed with the Tribunal's interpretation, citing the case of Collector of Central Excise, Pune Vs. Daiichi Karkaria Ltd., which underscored the indefeasibility of validly earned CENVAT Credit. The Court noted that once credit is earned, it is as good as tax paid and can be utilized without any limitation unless it was illegally or irregularly taken. Conclusion: The Supreme Court dismissed the appeal, affirming that the assessee is entitled to utilize the entire accumulated CENVAT Credit earned under the CENVAT Credit Rules, 2001. The authorities may verify the figures submitted by the assessee. This judgment reinforces the principle that accumulated CENVAT Credit under previous rules remains valid and usable, and new restrictions apply only prospectively.
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