2017 (4) TMI 218 - AT - Central Excise

Benefit of N/N. 29/2004-CE and N/N. 30/2004-CE both dated 09.07.2004 - denial on the ground that respondent failed to maintain separate records - Held that - the issue is no more res integra and covered by the decision of the Hon ble Gujarat High Court in the case of C.C.E. vs. Ashima Dyecot Limited 2008 (9) TMI 87 - HIGH COURT GUJARAT where it was held that reversal of credit amounts to non-taking of credit on the inputs. Hence the benefit has to be given of the notification granting exemption/rate of duty on the final products - benefit allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against order-in-appeal passed by Commissioner of Central Excise (Appeals), Ahmedabad-I regarding availing CENVAT Credit and benefit of exemption Notifications.

Analysis:
The case involves an appeal by the Revenue against an order-in-appeal passed by the Commissioner of Central Excise (Appeals), Ahmedabad-I. The respondent, a manufacturer of Man Made Fabrics (MMF), availed CENVAT Credit on inputs like Dyes, Chemicals & Packing materials. The respondent also availed the benefit of exemption Notifications No. 29/2004-CE and No. 30/2004-CE. However, as the respondent failed to maintain separate records of input consumption for goods cleared under both notifications simultaneously, a demand notice was issued for recovery. The demand was confirmed with interest and penalty, which was later allowed on appeal by the Commissioner (Appeals), leading to the present appeal by the Revenue.

The Revenue contended that despite reversing proportionate credit on inputs for exempted products, the respondent was not eligible for the benefit of Notification No. 30/2004-CE due to the lack of separate records maintenance. The Tribunal referred to the decision of the Hon'ble Gujarat High Court in C.C.E. vs. Ashima Dyecot Limited, where it was observed that maintaining separate accounts for inputs is crucial for availing exemption benefits under specific notifications. However, the Tribunal also cited the Supreme Court's decision in the case of Chandrapur Magnet Wires (P) Ltd., emphasizing that maintenance of separate accounts at the initial stage is not a condition precedent for claiming exemption benefits.

The Tribunal further highlighted Rule 6(3) of the Cenvat Credit Rules, 2004, which allows manufacturers opting not to maintain separate accounts to follow specific conditions. The Tribunal also referenced a judgment by the Allahabad High Court in Hello Minerals Water (P) Ltd. v. Union of India, supporting the view that reversal of credit on inputs does not disqualify the benefit of exemption on final products. Ultimately, the Tribunal dismissed the appeal, stating that the law laid down by the Supreme Court had been correctly applied, and no substantial question of law arose from the Tribunal's order.

The judgment was endorsed by the Supreme Court in C.C.E. vs. Ashima Dyecot Limited- 2009, and the Tribunal consistently followed this view. Consequently, the appeal filed by the Revenue was found to lack merit and was dismissed.