2023 (4) TMI 916 - AT - Central Excise

Carry forward of unutilized cenvat credit - lapsed credit or not - CENVAT credit reversed in the stock of materials/inputs contained in their finished goods WIP - Clearance of goods under exemption from whole of the duty of excise in terms of Notification no. 30/2004-CE - denial of carrying forward of balance credit on the ground that the same shall stand lapsed as the appellant have opted for full exemption under notification no. 30/2004-CE - HELD THAT - From the careful reading of the Rule 11(3), it makes clear that in case if assessee opts for the exemption from whole of the duty of excise leviable on the said final product under a notification issued under Section 5(A) of the Act and the said final product has been exempted absolutely under Section 5A of the Act, after deducting the cenvat credit in respect of inputs lying in stock or in process or contained in the final product, the remaining amount shall lapse. The said rule provides that in any case, the cenvat credit on stock of input lying in stock, in process and contained in finished goods needs to be reversed however, as regard the balance cenvat credit after such reversal shall lapse only in a case where the exemption notification is absolute. In the present case, notification no. 30/2004-CE is not a absolute notification - Since the above condition in such case in terms of clause (ii) of Rule 11(3) of Cenvat Credit Rules, 2004, the provision of lapsing of balance cenvat credit was not applicable in the present case. The issue is no longer res-integra accordingly, the impugned order being not sustainable in law - Appeal allowed.

Summary

Issues Involved:
1. Whether the appellant could carry forward the balance CENVAT credit after opting for exemption under Notification No. 30/2004-CE.
2. Interpretation of Rule 11(3) of CENVAT Credit Rules, 2004 regarding the lapsing of CENVAT credit.

Summary:

1. Carry Forward of Balance CENVAT Credit:
The appellant, engaged in the manufacture of polyester yarn, reversed CENVAT credit on inputs lying in stock, WIP, and finished goods upon opting for exemption under Notification No. 30/2004-CE. The issue was whether the remaining balance of CENVAT credit amounting to Rs. 32,32,703/- could be carried forward. The adjudicating authority denied this, stating that the credit should lapse as per Rule 11(3) of CENVAT Credit Rules, 2004.

2. Interpretation of Rule 11(3) of CENVAT Credit Rules, 2004:
The tribunal examined Rule 11(3), which mandates the lapsing of CENVAT credit when an absolute exemption is availed under Section 5A of the Act. However, Notification No. 30/2004-CE is conditional, specifying that the exemption does not apply to goods for which credit of duty on inputs or capital goods has been taken. The tribunal referenced multiple judgments, including Jansons Textile Processors, Patodia Filaments Pvt. Ltd., and Kanchan India Limited, which clarified that in cases of conditional exemptions, the balance CENVAT credit does not lapse.

The tribunal concluded that since Notification No. 30/2004-CE is not an absolute exemption, the provision for lapsing of credit under Rule 11(3) does not apply. Therefore, the appellant was entitled to carry forward the balance CENVAT credit.

Conclusion:
The tribunal set aside the impugned order, allowing the appellant to carry forward the balance CENVAT credit. The appeals were allowed, and the adjudicating authority's decision was deemed unsustainable in law and fact.

(Pronounced in the open court on 20.04.2023)