2016 (8) TMI 233 - AT - Central Excise

Reversal of cenvat credit taken on capital goods, on inputs lying on stock,inputs contained in the goods under process and inputs contained in finished goods lying in stock. - It started clearing goods at nil rate of duty w.e.f. 26.09.2003 availing benefit of Exemption Notification No.50/2003 dated 10.06.2003 - Held that - There is no provision in the rules which provides for a reversal of the credit by the Excise Authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilized, has to be paid for appeal allowed decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of refund claim of Rs. 42,66,887 based on reversal of cenvat credit.
- Applicability of Exemption Notification No.50/2003 dated 10.06.2003.
- Legal validity of reversing cenvat credit on capital goods and inputs.
- Interpretation of judicial precedents regarding cenvat credit utilization and reversal.

Analysis:
1. The appeal was filed against the rejection of a refund claim amounting to Rs. 42,66,887, where the appellant had reversed cenvat credit on capital goods and inputs. The appellant had initially availed the credit but reversed it under Revenue's insistence. The issue revolved around the necessity of this reversal and the subsequent payment of interest on the reversed amount. The appellant argued that the reversal was unnecessary, citing favorable judgments like HMT vs. Commissioner of Central Excise and Commissioner of Central Excise, Indore vs. Surya Roshini Ltd., to support their position.

2. The Tribunal considered the contentions of the appellant and referred to the judgment in the case of HMT vs. Commissioner of Central Excise, Panchkula, which highlighted that cenvat credit legally taken and utilized should not be recoverable without specific provisions. Additionally, the Tribunal mentioned the Madras High Court's decision in Tractor and Farm Equipment Ltd. vs. Commissioner of Central Excise, Madhurai-II, emphasizing that duty paid on inputs need not be reversed when goods are exempted from duty. The Tribunal quoted the High Court's observation regarding the utilization of credit and the lack of correlation between raw materials and final products.

3. Based on the analysis of the judicial precedents and the arguments presented, the Tribunal concluded that the impugned order rejecting the refund claim was not sustainable. The appeal was allowed, indicating that the reversal of cenvat credit and the subsequent interest payment were not warranted. The decision was made in light of the legal principles established in the cited cases, emphasizing the indefeasible nature of validly taken cenvat credit and the lack of requirement for correlation between inputs and cleared goods.

4. In the operative part of the order pronounced in the open court, the Tribunal granted the appeal, providing consequential relief as necessary. The judgment highlighted the importance of understanding the Central Excise Rules concerning the utilization and reversal of cenvat credit, ensuring compliance with legal provisions and judicial interpretations for future reference.