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TMI Blog2016 (10) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... nd final product was dutiable accordingly Modvat credit which they have availed cannot be disputed. He submits that on the very same issue Larger Bench of this Tribunal held that credit on the input lying in stock, in the event of final product getting exempted need not to be reversed. He placed reliance on the following judgment: (a) Ashok Iron & Steel Fabricators Vs. CCE [2002(140) ELT 277 (Tri. LB)] upheld by SC reported in [2003(156) ELT A212(SC). (b) HMT Vs. CCE[2008(232) ELT 217(Tri. LB)] (c) CCE Vs. CNC Commercial[2008(224) ELT 239(P&H)] (d) Ranbaxy Labortories Vs. CCE[2012(279) ELT 194 (HP)] (e) CCE Vs. Saboo Alloys[2010(249) ELT 519(HP)] (f) CCE Vs. Dai Ichi Karkaria[1999(112) ELT 353 (SC)] (h) CCE Vs. United VAnaspati[2010(251)ELT 373(P&H] (j) CCE & CE Vs. Apco Pharma Ltd [2015(319) ELT 641(Uttarakhad)] (k) Tractor and Farm Equipment Ltd Vs. CCE affirmed by Supreme Court reported in [2015(324) ELT A86(SC)] He further submits that the specific provision for reversal of Cenvat credit in respect of input lying in stock when the final product become exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturer did not have any indefeasible right or title to it. The credit of excise duty on the raw material in the register maintained for Modvat purposes was only a book entry which might be utilised later for payment of excise duty on the excisable product. In other words, it matured when the excisable product was removed from the factory and the stage for payment of excise duty thereon was reached. This argument did not find favour with the Apex Court. The nature of the credit for excise duty paid on raw material was explained in the following manner :- "It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows :- "Where a manufacturer who opts for exemption from the whole of the duty of excise leviable on goods manufactured by him under a notification based on the value or quantity of clearances in a financial year, and who has been availing of the credit of the duty paid on inputs before such option is exercised, he shall be required to pay an amount equivalent to the credit, if any, allowed to him in respect of inputs lying in stock or used in any finished excisable goods lying in stock on the date when such option is exercised and after deducting the said amount from the said amount from the balance, if any, lying in his credit, the balance, if any, still remains shall lapse and shall not be allowed to be utilized for payment of duty on excisable goods, whether cleared for home consumption or for export." 8. After considering the Rule 57, the Apex Court held as follows :- "It is clear from these rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the High Court of Rajasthan in Hindustan Zinc Ltd. v. Union of India, 2008 (223) E.L.T. 149. The High Court held as follows :- "It can be seen from yet another angle. In case inputs are received in factory and used in manufacture of end product. But the end product is destroyed by fire before stage of its removal from factory premise. In such circumstances, no excise duty becomes payable on end product. Yet Modvat credit availed on inputs used in destroyed goods is not to be recalled. This is also suggestive of the fact the relevant date for considering exemption from duty of the end product in or in relation to which inputs are used is the date of its receipt in factory and condition is its actual use in or in relation to manufacture of end product by the manufacturer. The chargeability to duty or non-chargeability due to exemption or notified nil rate is to be considered at the stage before goods are actually produced, but on receipt of inputs intended to be used in manufacture of such goods. That being so ultimate clearance of goods at nil rate due to contingency existing at the time of removal does not affect the entitlement that legally arises long before that date." 13. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and the final product: that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available." (emphasis supplied) 16. Once it is held that no co-relation between the raw material and the final product is required, the appellant's plea stands answered. If credit can be taken against excise duty on a final product manufactured on the very day, it makes it abundantly clear that there need not be co-relation between the input and the goods cleared and as a result, validly taken credit need not be reversed. The Central Excise Rules would come into play in the following manner, that is to say, on the date when the final goods become exempt from payment of duty, for the inputs received on and after the said date, no credit can be taken. This would be the correct method of understanding of the position of law. 17. The introduction of Rule 11(3) of the Cenvat Credit Rules, 2004, by Notification No. 10/2007-C.E. (N.T.), dated 1-3-2007 and the Tax Research Unit Circul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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