2024 (3) TMI 126 - HC - Central Excise

Adoption of hybrid option of post clearance availment of Ineligible CENVAT credit on inputs and payment of amount equal to 6% of the value of such exempted goods under rule 6(3) of the Credit Rules - violation of the condition prescribed in Notification No. 30/2004-C.E. - HELD THAT - Once the assessee has reversed the 6% of the value of the goods treating such goods as exempted as per the Sub-rule (3D) of the Rule 6 of the Rules, the condition of the Notification No. 30 of 2004 can be said to have been met and in such circumstances, the Tribunal has rightly allowed the appeal of the respondent-Assessee by quashing and setting aside the demand raised by the appellant. No question of law, much less any substantial questions of law, arises from the impugned order passed by the Tribunal - appeal dismissed.

Summary

Issues Involved:
The issues involved in this case are whether the appellant's adoption of a hybrid option of post-clearance availment of Ineligible CENVAT credit on inputs and payment of an amount equal to 6% of the value of exempted goods under rule 6(3) of the Credit Rules leads to unjust enrichment, and whether the appellant was entitled to exemption under Notification No. 30/2004-CE.

Issue 1: Hybrid Option of CENVAT Credit and Payment:
The appellant had adopted a hybrid method involving post-clearance availment of Ineligible CENVAT credit on inputs and payment of 6% of the value of exempted goods under rule 6(3) of the Credit Rules. The appellant cleared goods without duty payment, availed full CENVAT credit on inputs, reversed a portion of it, and retained the balance. The dispute arose regarding compliance with Notification No. 30/2004-CE conditions, leading to the demand of Excise Duty by the adjudicating authority.

Issue 2: Entitlement to Exemption under Notification No. 30/2004-CE:
The respondent-assessee was manufacturing both dutiable and exempted goods using cenvated inputs and availing the benefit of exemption under Notification No. 30/2004-CE. The appellant's compliance with Rule 6(3) by reversing the CENVAT credit was challenged by the appellant-Revenue, arguing that once the credit was availed, the condition of the notification was violated, rendering the assessee ineligible for exemption.

Judgment Summary:
The Tribunal, after considering Rule 6(3) of the Credit Rules and the appellant's reversal of CENVAT credit by 6% of the value of goods, found that the compliance with the condition of the notification was met. The Tribunal relied on the provision of Sub-rule (3D) of Rule 6, which deems payment under sub-rule (3) as non-availment of credit, thereby satisfying the notification's condition. The Tribunal referenced previous decisions supporting the appellant's position and set aside the demand for denying exemption under Notification No. 30/2004-CE.

Conclusion:
The Tribunal's decision was based on the appellant's compliance with Rule 6(3) and Sub-rule (3D) of the Credit Rules, which deemed the payment as non-availment of credit for exemption purposes. The appeal was allowed, dismissing the demand for denying the exemption under Notification No. 30/2004-CE.