2018 (2) TMI 1400 - AT - Central Excise

Benefit of N/N. 1/2011-CE dated 01.03.2011 as amended by N/N. 43/2011 dated 30.12.2011 (Sl. No. 131 - sanitary napkins falling under tariff item 9619 00 10 of the Central Excise Tariff Act, 1985 - Department took the view that since the appellant has availed Cenvat Credit of the tax paid on services, the appellant will not be entitled to the benefit of the N/N. 1/2011 ibid - case od appellant is that they had reversed the credit subsequently, and thus they are entitled for benefit. Held that - The legal position that once the cenvat credit availed has been reversed, it is to be considered as not availed, ab initio has been settled by the Hon ble Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. vs. CCE, Nagpur 1995 (12) TMI 72 - SUPREME COURT OF INDIA . It is seen from the record that in the revised return filed on 25.04.2015, the cenvat credit of ₹ 16,16,790/- paid on input services has been deleted. Further, the appellant vide their written submission dated 19.01.2018 has confirmed that they have further reversed the amount of ₹ 97,957/- alongwith the interest of ₹ 88,258/-. The net result of the revised return as well as the further payment is that the entire cenvat credit availed on input services have been reversed by the appellant. The appellant can be considered as not availed the cenvat credit of input services, ab initio. Accordingly, they will be entitled to the benefit of N/N. 1/2011 during the disputed period - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
- Availment of concessional duty benefit under Notification No. 1/2011-CE
- Reversal of Cenvat credit on input services
- Interpretation of legal position on reversal of Cenvat credit

Analysis of Judgment:

Issue 1: Availment of concessional duty benefit under Notification No. 1/2011-CE
The appellant, engaged in manufacturing sanitary napkins, availed the benefit of Notification No. 1/2011-CE for concessional duty subject to not taking credit of duty on inputs or Service Tax on input services. The dispute arose when the appellant filed ST-3 returns declaring availed credit, triggering a demand for full Central Excise duty by the Department. The appellant argued that revised returns were filed, reversing the credit, and claimed entitlement to the notification benefit.

Issue 2: Reversal of Cenvat credit on input services
The appellant rectified the mistake in the ST-3 return by filing revised returns under Rule 7B of the Service Tax Rules, 1994, reversing the credit amount. The appellant contended that the reversed credit was not utilized and was for output services, not related to exempted goods' manufacture. The Department, however, maintained that the appellant availed the credit, rendering them ineligible for the concessional duty benefit.

Issue 3: Interpretation of legal position on reversal of Cenvat credit
The Tribunal referred to legal precedents, including the Supreme Court and High Court decisions, emphasizing that once Cenvat credit is reversed, it is deemed as not availed ab initio. The appellant successfully demonstrated the reversal of the entire Cenvat credit on input services, aligning with the legal position. Consequently, the Tribunal held that the appellant should be considered as not having availed the credit, thereby entitling them to the benefit of Notification No. 1/2011-CE during the disputed period.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant based on the reversal of Cenvat credit aligning with legal interpretations. The judgment highlighted the significance of timely rectification and compliance with notification conditions to avail concessional duty benefits under the law.

This comprehensive analysis of the judgment covers the issues involved, the arguments presented by both parties, the legal interpretations applied, and the final decision rendered by the Tribunal.