2024 (11) TMI 6 - AT - Central Excise

Reversal of CENVAT Credit - denial of benefit of notification no. 30/2004-CE - non-reporting and non-disclosure of discontinuation of duty liability on finished products - HELD THAT - It is not in dispute that the appellant had cleared all final product by availing exemption in the impugned notification and that such exemption is not available in the event that CENVAT credit had been taken on the inputs used in the manufacture of the finished products. As duty liability had been discharged on the intermediate product, the entitlement to avail credit thereof could not be denied and, to the extent that such credit was utilized for clearance of the intermediate product, there is no provision in law which enables recovery of duty thereof. The denial of exemption notification, and consequent recovery of duty, is premised on credit having been taken even though the goods involved were allegedly used in the manufacture of finished products that were exempted. It is the claim of the appellant that these were actually used in the manufacture of intermediate product that was duty paid and hence eligible to be availed as credit. Without going into the technicalities and on the averment that the disputed credit had been reversed, in conjunction with the decision of the Hon ble High Court of Allahabad in HELLO MINERAL WATER P. LTD. VERSUS COMMISSIONER OF C. EX., NOIDA 2003 (10) TMI 416 - CESTAT, NEW DELHI holding that ' the order of the Tribunal dated 1-10-2003 in so far as it relates to denial of the benefit of Notification No. 15/1994-CE is liable to be, and is hereby, set aside. The petitioner is thus entitled to the benefit of the said Notification No. 15/1994-CE, dated 1-3-2004 and reversal of Modvat credit on the inputs namely PVC granules used in the manufacture of PVC/PP bottles, which have been admittedly reversed by the petitioner, even though after clearance of the final product. - thus, the continuation of the detriment to the appellants does not sustain. The impugned order is set aside and the appeals are allowed.

Summary

Issues:
1. Chargeability to duty under Central Excise Act, 1944 based on denial of benefit of notification no. 30/2004-CE.
2. Allegations of non-reporting and non-disclosure of discontinuation of duty liability on finished products.
3. Denial of exemption notification due to alleged breach of conditions and seizure of finished product stock.
4. Availment of CENVAT credit on inputs used in manufacturing process.
5. Reversal of credit and its impact on eligibility for duty exemption.
6. Interpretation of legal provisions regarding reversal of credit and its timing.
7. Consistency in tribunal decisions regarding reversal of credit for availing benefits of notifications.
8. Final decision and setting aside of impugned order.

Analysis:
1. The case involved M/s Talreja Textile Industries Ltd appealing against an order of the Commissioner of Central Excise fastening a duty liability of &8377; 19,79,86,930 for the period between November 2011 to August 2016. The main issue was the chargeability to duty based on the denial of benefit of a specific notification due to an alleged breach of conditions regarding CENVAT credit availed on certain inputs.
2. The appellant argued that they had reversed a certain amount of credit and disputed the disproportionate consequences, citing a decision of the Hon'ble High Court of Allahabad in a related matter.
3. The appellant's manufacturing process involved two products, and the dispute arose from the clearance of final products without duty payment while discharging duty liability on intermediate products. The non-disclosure of discontinuation of duty liability and alleged violation of notification conditions led to a search of the premises and seizure of finished product stock.
4. The appellant's counsel contended that the allegations of non-reporting were technical in nature and that they had complied with the entitlement to the exemption notification. They detailed the availed credits on goods and services procured and argued for the eligibility of certain credits which had been reversed.
5. The Tribunal noted that the appellant had cleared final products by availing exemption but faced denial of exemption due to alleged availing of CENVAT credit on inputs. The reversal of credit was a crucial factor in determining eligibility for duty exemption.
6. The Tribunal delved into the interpretation of legal provisions and previous decisions, emphasizing the significance of reversing credit on inputs used in the manufacture of duty-free goods for availing exemptions. Various tribunal decisions were cited to support the view that reversal of credit post-clearance of final products could still entitle the assessee to benefits of notifications.
7. The Tribunal highlighted the consistency in tribunal decisions regarding the reversal of credit and its impact on availing benefits of notifications, ultimately leading to the setting aside of the impugned order and allowing the appeals of the appellant.
8. The final decision set aside the impugned order, emphasizing the entitlement of the appellant to the benefit of the notification and the impact of credit reversal on duty exemption eligibility.