2018 (9) TMI 1348 - AT - Central Excise

Reversal of Cenvat Credit - Absolute exemption or not? - Applicability of Rule 11(3) of Cenvat credit Rule, 2004 - Utilization of CENVAT credit lying unutilized - N/N. 30/2004 Central Excise date 09.07.2004 - Held that - Notification No. 30/2004 Central Excise date 09.07.2004 do not grant exemption in absolute. In fact, it is a conditional exemption that if the assessee has not availed Cenvat credit on inputs, the exemption is available. The provision of Rule 11 (3) clause 2 are applicable only in a situation where exemption is absolute. Admittedly, in this case exemption is not absolute. In that circumstances, the provisions of Rule 11 (3) (2) are not applicable to the facts of this case, therefore, the Cenvat credit lying unutilized on 01.04.2006 shall not lapse and same can be utilized by the appellant latter on. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of Notification No. 30/2004 Central Excise dated 09.07.2004
- Applicability of Rule 11(3) of Cenvat Credit Rule, 2004
- Utilization of Cenvat credit by the appellant
- Decision on appeals filed by both the assessee and the Revenue

Analysis:

Interpretation of Notification No. 30/2004 Central Excise dated 09.07.2004:
The case involved the interpretation of Notification No. 30/2004 Central Excise dated 09.07.2004, which provided a conditional exemption for not availing Cenvat credit on inputs. The Tribunal clarified that the exemption granted by this notification was not absolute but conditional upon the non-availment of Cenvat credit on inputs.

Applicability of Rule 11(3) of Cenvat Credit Rule, 2004:
The Tribunal examined the applicability of Rule 11(3) of the Cenvat Credit Rule, 2004, which states that in certain circumstances, the entire credit shall lapse. It was argued by the Revenue that the appellant should have reversed the Cenvat credit when opting for exemption. However, the Tribunal held that since the exemption was conditional and not absolute, the provisions of Rule 11(3) (2) were not applicable in this case. Therefore, the Cenvat credit lying unutilized by the appellant on 01.04.2006 was deemed usable later on.

Utilization of Cenvat credit by the appellant:
The appellant had reversed Cenvat credit on inputs, semi-finished goods, and finished goods upon opting for exemption under Notification No. 30/2004. Subsequently, the appellant utilized the remaining Cenvat credit for payment of duty in different months. The Revenue contended that the unutilized credit should lapse, leading to the initiation of recovery proceedings. However, the Tribunal ruled in favor of the appellant, allowing the utilization of the remaining Cenvat credit based on the conditional nature of the exemption.

Decision on appeals filed by both the assessee and the Revenue:
The Tribunal set aside the impugned orders against the appellant in Appeal No. E/2013/2012 & E/70487/2016, as it found no merit in the Revenue's arguments regarding the lapse of Cenvat credit. On the other hand, the order passed by the learned Commissioner (Appeals) in appeal No. E/54034/2014 was upheld. Consequently, the appeals filed by the assessees were allowed, while the appeal filed by the Revenue was dismissed.

This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal and the reasoning behind its decision, emphasizing the legal interpretation of relevant provisions and notifications in the context of the case.