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2015 (9) TMI 925 - AT - Central ExciseReversal of Cenvat Credit - Final product become exempt subsequently - inputs lying in stock when the Retail Computer System became exempted by Notfn No.23/2004 dt. 9.7.2004 - Held that - During the relevant period there is no specific provision in CCR for recovery of cenvat credit on the inputs lying in stock when the final product became exempted fully. Only from 1.3.2007 a specific sub-rule (3) of Rule 11 of CCR was inserted making specific provision where a manufacture is required to pay amount equal to the cenvat credit taken on inputs lying in stock if the final product became fully exempted. The Revenue relied on Tribunal s decisions in the case of Albert David Ltd. Vs CCE (2002 (11) TMI 144 - CEGAT, COURT NO. III, NEW DELHI) and Explicit Trading & Marketing (P) Ltd. Vs Commissioner (2009 (3) TMI 978 - SUPREME COURT). Both the decisions were upheld by Supreme Court 2003 (3) TMI 709 - SUPREME COURT . I am fully aware of the fact that this Tribunal Bench also upheld the reversal of credit in the case of CCE Vs M/s.Annapoorna Re-rolling Mills (P) Ltd. (2011 (8) TMI 1093 - CESTAT CHENNAI) - The ratio of the High Court of Madras order 2014 (12) TMI 905 - MADRAS HIGH COURT is squarely applicable to the present case as the appellant availed the credit on inputs when the final product was dutiable and there was no one to one correlation and the final product was exempted vide Notfn 23/2004-CE dt. 9.7.2004 and the sub-rule (3) of Rule 11 of CCR came into effect from 1.3.2007 onwards and cannot be applied retrospectively. - impugned order confirming the demand on credit already taken on inputs lying in stock when the finished goods i.e. computers became exempted on 9.7.2004 is liable to be set aside - Decided in favour of assessee.
Issues:
1. Disallowance of cenvat credit on inputs when final product became exempted. 2. Interpretation of CCR provisions regarding reversal of credit on exempted final products. 3. Applicability of specific provisions to the case retrospectively. 4. Binding effect of High Court judgments on the Tribunal's decision. Issue 1: Disallowance of cenvat credit on inputs when final product became exempted: The case involved manufacturers of Retail Computer Systems and DOT Matrix Printers availing cenvat credit on inputs used in manufacturing. The dispute arose when the final product, computers, became exempted from excise duty. The authorities sought to reverse the credit availed on inputs in stock at the time of exemption. The appellant argued that there was no provision for such reversal before 1.3.2007 and cited relevant case laws supporting their position. The Tribunal analyzed the facts and held that the denial of credit on inputs in stock when the final product became exempted was not maintainable, following the principle that credit once validly taken is indefeasible unless utilized illegally or irregularly. Issue 2: Interpretation of CCR provisions regarding reversal of credit on exempted final products: The Tribunal examined the provisions of the Cenvat Credit Rules and noted that specific rules for recovery of credit on inputs lying in stock upon full exemption of final products were introduced only from 1.3.2007. The Revenue relied on previous decisions upholding the reversal of credit in similar cases. However, the Tribunal distinguished the case at hand based on the absence of a direct correlation between inputs and final products, emphasizing that validly taken credit need not be reversed unless utilized illegally or irregularly. Issue 3: Applicability of specific provisions to the case retrospectively: The appellant argued against the retrospective application of the provisions introduced in 2007 to their case, which pertained to the period before the exemption of computers. The Tribunal agreed with this argument, emphasizing that the specific sub-rule requiring payment equivalent to credit taken on inputs lying in stock upon full exemption of final products could not be applied retrospectively. The decision was based on the timing of events and the absence of relevant provisions during the disputed period. Issue 4: Binding effect of High Court judgments on the Tribunal's decision: The Tribunal considered the binding effect of a High Court judgment on its decision-making process. It referred to a specific case where the High Court of Madras had ruled in favor of the appellant in a similar matter, emphasizing that the High Court's decision was binding on the Tribunal. The Tribunal applied the reasoning and ratio of the High Court judgment to the present case, ultimately setting aside the demand for reversal of credit on inputs and allowing the appeal with consequential relief based on the precedent set by the High Court's decision. This detailed analysis of the judgment showcases the legal intricacies involved in the dispute over cenvat credit reversal on exempted final products and the Tribunal's thorough examination of relevant provisions and precedents to reach a just decision.
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