2018 (8) TMI 1094 - AT - Central Excise

CENVAT Credit - unutilized balance of Cenvat Credit lying in the credit account - N/N. 30/2004 dated 09.07.2014 - Held that - In the present case the appellant has opted for exemption as per the N/N. 30/2004-CE where the exemption is conditional. As per Rule 11 (3)(ii) CCR, Cenvat Credit balance will lapse only if the product is exempted absolutely under Section 5A of Central Excise Act. But since the Notification No. 30/2004-CE dated 09.07.2004 is a conditional notification, hence only Rule 11 (3)(i) of CCR would apply which does not mandate any such lapsing. Reliance placed in the case of Jansons Textile Processors vs. Commissioner, Central Excise & ST Salem 2018 (7) TMI 850 - CESTAT CHENNAI , where it was held that in sub rule 3 (i) ibid, the assessee has to opt‛ for the exemption whereas in sub-rule 3 (ii) ibid, there is no such option available to the assessee and the absolute exemption that may have been brought forth under Section 5A ibid would apply unilaterally to the related final product manufactured by the assessee. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of Rule 11 of Cenvat Credit Rules, 2004 regarding lapsing of unutilized credit balance.
- Applicability of Notification No. 30/2004-CE for exemption and its conditions.

Analysis:
1. Interpretation of Rule 11 of Cenvat Credit Rules, 2004:
The case involved a dispute regarding the lapsing of unutilized Cenvat Credit balance under Rule 11 of the Cenvat Credit Rules, 2004. The appellant, engaged in yarn manufacturing, sought to avail the benefit of exemption under Notification No. 30/2004 dated 09.07.2014 for the unutilized Cenvat Credit balance. The Department contended that the credit should lapse due to non-compliance with Rule 11 (3) (i) & (ii) of the Cenvat Credit Rules. The Tribunal analyzed the provisions of Rule 11 and held that as per Rule 11 (3)(ii) CCR, the credit balance would only lapse if the product is absolutely exempted under Section 5A of the Central Excise Act. Since the exemption under Notification No. 30/2004-CE was conditional, Rule 11 (3)(i) of CCR applied, which did not mandate the lapsing of the credit balance.

2. Applicability of Notification No. 30/2004-CE for exemption:
The Tribunal referred to a decision by CESTAT-Chennai in a similar case to support its interpretation. The Tribunal highlighted the distinction between sub-rules 3 (i) and 3 (ii) of Rule 11, emphasizing that they are separate alternatives with different qualifying factors and conditions. The Tribunal concluded that the lower appellate authority's decision was not legally sound and set it aside, allowing the appeal with consequential benefits. By applying the principles established in the referenced case law, the Tribunal ruled in favor of the appellant, holding that the unutilized Cenvat Credit balance should not lapse due to the conditional nature of the exemption under Notification No. 30/2004-CE.

This detailed analysis of the judgment showcases the Tribunal's thorough examination of the relevant legal provisions, precedents, and factual circumstances to arrive at a reasoned decision in favor of the appellant.