2015 (10) TMI 2450 - AT - Central Excise

Reversal of CENVAT Credit - Exemption of duty on such pipes in terms of Notification No.6/2002 - Appellant contended that notification does not require any reversal of Cenvat credit on the inputs or work-in-progress or finished goods lying in stock on the date on which exemption was granted. - Held that - It has not availed any exemption either on value-based or quantity-based criteria for clearance in a financial year. Therefore, this rules out applicability of Rule 9 (2) of Cenvat Credit Rules, 2002. Once the applicability of Rule 9 (2) is ruled out, there is no further case of Revenue and if unutilised credit is on record under Rule 9 (1) prior to 04.04.2002 and remaining unutilised, there is a modality prescribed by law for utilisation. The modality prescribed by Rule 9 (2) only. Once Rule 9 (2) of Cenvat Credit Rules, 2002 is not applicable even Rule 9 (1) has no significance. Notification did not prescribe any value-based or quantity-based exemption. There is no case of Revenue to the contrary. Therefore, Rule (2) of Rule 9 of Cenvat Credit Rules, 2004 is not applicable - If Cenvat credit is taken validy, which is not disputed by the department, in absence of one-to-one relationship between input or output or output service, there cannot be exercise of power by executive to ask the assessee to revert such Cenvat credit. Following this ratio, the order of authority below is set aside - Decided in favour of assessee.

Issues:
1. Claim of exemption of duty on manufactured pipes under specific notifications.
2. Allegation by the department on the reversal of Cenvat credit.
3. Applicability of Rule 9 of Cenvat Credit Rules, 2002.
4. Examination of the case in light of the law relating to Cenvat credit.
5. Interpretation of relevant notifications and rules.
6. Validity of Cenvat credit reversal.

Analysis:
The case revolved around the appellant, a manufacturer of PSC pipes, claiming exemption of duty on the pipes utilized for a national water project under specific notifications. The department alleged that since the finished goods were exempt from duty, the appellant had to reverse the Cenvat credit availed on inputs, work-in-progress, and finished goods. The counsel argued that the notification did not mandate such reversal and highlighted the exemption availed for the water project. Reference was made to the judgment of the High Court of Madras in a similar case, emphasizing that once Cenvat credit is validly taken, it cannot be reverted back without a one-to-one relationship between input and output. The Tribunal noted that the appellant had not availed any exemption criteria, ruling out the applicability of Rule 9(2) of Cenvat Credit Rules, 2002. The Tribunal emphasized that since Rule 9(2) was not applicable, even Rule 9(1) had no significance in this scenario.

The Tribunal analyzed the notifications cited by the appellant, noting that they did not prescribe any value-based or quantity-based exemption, thereby rejecting the Revenue's argument. Citing the judgment of the High Court of Madras and the Supreme Court in previous cases, the Tribunal concluded that validly taken Cenvat credit cannot be reversed without a clear correlation between input and output. The Tribunal set aside the order of the lower authority and allowed the appeal, emphasizing the indefeasible right to retain Cenvat credit once validly taken. The judgment highlighted the importance of following established legal principles in Cenvat credit matters and the need for a clear nexus between input and output to justify any reversal of credit.

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