2017 (2) TMI 759 - AT - Central Excise

Benefit of N/N. 30/2004-C.E., dated 9-7-2004 - denial on the ground that the appellant has taken the credit on the inputs - Held that - before clearance of the said goods, the appellant has reversed the credit attributable to the inputs used in the manufacture of said goods - the reversal of credit is equivalent to not taken the credit on inputs used, in the manufacture of said goods - the appellant is entitled to avail the benefit of N/N. 30/2004-C.E - appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of benefit under Notification No. 30/2004-C.E.

Analysis:
The appellant, a manufacturer of yarn, appealed against the denial of benefit under Notification No. 30/2004-C.E., which exempted certain yarn from duty payment. The appellant availed credit on inputs during procurement but reversed the credit when claiming exemption under the said notification. The revenue contended that since the appellant took credit on inputs, they were not entitled to the exemption. A show cause notice was issued for denial of exemption, duty demand, interest, and penalty for a specific period. The adjudicating authority upheld the denial of benefit, leading to the appellant's appeal.

Legal Argument by Appellant:
The appellant argued that they were not aware of which inputs would be used in manufacturing the exempted goods at the time of credit availment. They reversed the credit attributable to the inputs used in manufacturing the said goods before clearance, complying with Rule 6(3) of Cenvat Credit Rules, 2004. The appellant cited previous cases where similar benefits were granted, urging the tribunal to set aside the impugned order.

Counter Argument by Revenue:
The revenue, represented by the learned AR, supported the findings of the impugned order that denied the benefit under the notification.

Tribunal's Decision:
After hearing both parties and considering the submissions, the tribunal agreed with the appellant's argument. They noted that the appellant had reversed the credit on inputs used in manufacturing the exempted goods before clearance, effectively not taking the credit on those inputs. Consequently, the tribunal held that the appellant was entitled to the benefit under Notification No. 30/2004-C.E. The demands imposed on the appellant were deemed unsustainable, leading to the setting aside of the impugned order. The appeal was allowed with any consequential relief deemed necessary.

Conclusion:
The tribunal's decision favored the appellant, emphasizing that the reversal of credit on inputs used in manufacturing the exempted goods allowed them to avail the benefit under the notification. The judgment highlighted the importance of compliance with Cenvat Credit Rules and upheld the appellant's right to the exemption, ultimately setting aside the demands imposed by the revenue.