2023 (8) TMI 244 - AT - Central Excise

Benefit of N/N. 30/2004-CE dated 09-07-2004 (Sr. No. 9) denied - appellant though availed the Cenvat Credit on the common inputs however at the time of clearance of the goods they have reversed 5% of the value of the goods in terms of Rule 6(3)(i) of Cenvat Credit Rules 2004 - denial on the ground that the appellant have availed the Cenvat Credit on receipt of the common inputs - HELD THAT - The facts is not under dispute that the appellant though availed the Cenvat Credit initially but at the time of clearance of goods under Notification No. 30/14-CE they reversed 5% in terms of Rule 6 (3)(i) of Cenvat Credit Rules, 2004. Payment of an amount of 5% in terms of sub-rule (3D) shall be deemed to be Cenvat Credit not taken for the purpose of an exemption Notification where in any exemption is granted on the condition that no Cenvat Credit of inputs and input services shall be taken. In terms of the above sub-rule (3D) in an exemption, if there is a condition of non-availment of Cenvat Credit but even if the Cenvat Credit is availed on the common input and input services by reversing the credit as per the Rule 6(3) the condition of the Notification shall stand complied with - the reversal of 5% of the value of exempted goods in terms of 6(3)(i) of Cenvat Credit Rules, 2004 is one of the mechanisms to expunge the Cenvat Credit availed by the assessee therefore even after taking the credit if the assessee reverse an amount, as provided in Rule 6(3) it will amount to non availment of Cenvat Credit. This issue has been considered by this Tribunal in the case of Spentex Industries Ltd 2016 (9) TMI 282 - CESTAT NEW DELHI wherein even for the period before the insertion of Rule 6(3D) of Cenvat Credit Rules, 2004, it was held that when the assessee reverse 6% of the value of the exempted goods in terms of Rule 6(3)(i) the condition of the Notification No. 30/04-CE stands complied with and demand shall not be sustainable. Thus, it is clear that the appellant by reversing 5% of the value of exempted goods in terms of Rule 6(3)(i) fulfilled the condition of Notification No. 30/2004-CE. Therefore, the appellant are legally entitle for exemption Notification No. 30/2004-CE, and the demand is not sustainable. Appeal allowed.

Summary

Issues involved: The case involves the interpretation of Notification No. 30/2004-CE regarding the availing of Cenvat Credit on inputs for goods cleared under the exemption, specifically focusing on the reversal of 5% of the value of goods under Rule 6(3)(i) of Cenvat Credit Rules 2004.

Summary of Judgment:

Issue 1: The appellant availed Cenvat Credit on common inputs but reversed 5% of the value of goods at the time of clearance to comply with the conditions of Notification No. 30/2004-CE.

- The department contended that availing Cenvat Credit violated the exemption condition.
- The appellant argued that by reversing 5%, they effectively did not avail Cenvat Credit.
- Tribunal considered the insertion of Rule 6(3D) with retrospective effect from 01.04.2011.
- The Tribunal cited precedents where reversal of credit was deemed as non-availment, satisfying exemption conditions.

Issue 2: Applicability of sub-rule (3D) of Rule 6 in determining eligibility for exemption under Notification No. 30/2004-CE.

- Tribunal found the appellant's claim under sub-rule (3D) of Rule 6 legally sustainable.
- The deeming provision under sub-rule (3D) considered the payment under sub-rule (3) as credit not taken for exemption purposes.
- Precedents supported the contention that reversal of credit fulfilled exemption conditions.

Separate Judgment by Tribunal:
- The Tribunal set aside the impugned order, allowing the appeal based on the fulfillment of exemption conditions through the reversal of 5% of the value of exempted goods.

This judgment clarifies the interpretation of Cenvat Credit rules in relation to availing exemptions under Notification No. 30/2004-CE, emphasizing the significance of reversing credits to comply with exemption conditions.