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TMI Blog2008 (10) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... t was dutiable, need not be reversed on the final product becoming exempt from payment of duty w.e.f. 9-7-2004? OR (II) Whether the Order dated 1-2-2007 passed by the CESTAT, Chennai enunciates the correct position of law and hence the input credit taken in respect of inputs in stock or in process or contained in the final product in stock on 9-7-2004 is to be reversed and is to be recovered if adequate credit is not in balance? 2. There is conflicting decisions rendered by the CESTAT, Bangalore Bench and Chennai Bench. The Bangalore Bench in the case of TAFE Ltd. (Tractor Division) v. CCE , Bangalore - 2007 (210) E.L.T. 571 (Tribunal) = 2007 (79) RLT 706 (T-Bangalore) held that the input credit legally taken, when the final product was dutiable need not to be reversed on final product becoming exempt from payment of duty w.e.f. 9-7-2004. On the other hand, the Chennai Bench in the case of Tractors Farm Equipments Ltd. v. CCE 2007 (212) E.L.T. 223 (Tribunal) = 2007 (79) RLT 384 (T-Chennai) held that the credit taken on input in stock or in process or contained in the final product in stock on 9-7-2004, is liable to be reversed if unutilised an the conflicting b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Scheme during the period (i.e. 1996) when the final products were dutiable is required to be reversed when subsequently the final product was exempted from duty, was placed before the Five Members Bench of the Tribunal in the case of Commissioner of Central Excise, Rajkot v. Ashok Iron and Steel Fabricators as reported in 2002 (140) E.L.T. 277 (T-LB), in view of the conflicting decisions of two High Courts, viz. Super Cassettes Industries v. Union of India - 1997 (94) E.L.T. 302 of Allahabad High Court and Collector of Central Excise Customs, Cochin v. Premier Tyres Ltd . - 2001 (130) E.L.T. 417 of Kerala High Court. The Larger Bench of the Tribunal followed the decision of Kerala High Court in the case of Premier Tyres Ltd. (supra), wherein it has been held that if at the time of taking the Modvat credit, final products are not exempted, it is not necessary to reverse the credit in the light of subsequent exemption notification relating to the final product. It has followed the decision of the Hon'ble Supreme Court in the case of Collector v. Dai Ichi Karkaria Ltd. - 1999 (112) E.L.T. 353 (S.C.). The Larger Bench dismissed the appeal filed by the Revenue ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. (supra) held that input credit taken in respect of inputs in stock or in process or contained in final product in stock on 9-7-2004 liable to be reversed and to be recovered if adequate credit is not in balance. It has been held that Rule 57AH of the Rules, 1944 is for recovery of such duty. It has considered the decision of Bangalore Bench. 10. Ld. Advocate on behalf of the Appellants submits that the Hon'ble Supreme Court in the case of Dai Ichi Karkaria Ltd. (supra) held that there is no provisions in the Rules, 1944 for reversal of credit by the Revenue except it has been taken in irregular or illegal manner. He drew the attention of changes of Modvat/Cenvat Credit Rules time to time. He submits that by Notification No.10/2007-C.E. (N.T.), dated 1st March, 2007, Sub-Rule (3) was inserted in Rule 11 of Cenvat Credit Rules, 2004 for reversal of credit in such situation. He submits that the Notification indicates that the said notification shall come into force on the date of their publication in the Official Gazette. So, there is no provision to reverse the credit prior to Notification dated 1st March, 2007. It is also contended that the Appellants utilised credit lawfull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory in nature. 12. It is significant to note that Five Members Bench, Bangalore and Chennai Bench of Tribunal passed the decisions following the observation of the Hon'ble Supreme Court in the case of Dai Ichi Karkaria Ltd. (supra). For the purpose of proper appreciation of the case, the relevant portion in the case of Dai Ichi Karkaria Ltd. (supra) is reproduced below:- "17. 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 really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2000, which is the specific provision for recovery of credit utilised by the Appellants in such situation. Sub-rule (1) of Rule 57-I as amended is reproduced below:- "57-I. Recovery of credit wrongly taken. - (1) Where the CENVAT credit has been taken or utilised wrongly, the same along with interest shall be recovered from the manufacturer and the provisions of sections 11A, 11AA and 11AB of the Act shall apply mutatis mutandis for affecting such recoveries." 16. We may observe that Rule 57-I of Rules 1944 equivalent to Rule 57AH and Rule 12 would apply where the Cenvat Credit has been taken or utilised wrongly. In the present case, there is no objection of the Revenue whatsoever credit taken by the Appellants and its utilisation at the clearance of the dutiable final products. So, the taking of credit and its utilisation were correct. The Hon'ble Supreme Court in the case of Dai Ichi Karkaria Ltd. (supra) decided that when the credit was legally taken and utilised, cannot demanded unless there is specific provision. It is settled that there is no one to one co-relation of utilisation of credit and use of inputs in the Modvat/Cenvat Scheme. So, it cannot be said that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to nil rate of duty applies in case where such exemption from payment of Duty or nil rate of Duty on end product is predictably known at the time the recipient of inputs is entitled to take credit of duties paid on such inputs. The fact that due to subsequent notification or on contingency that may arise in future, the end product is cleared without payment of duty due to exemption or nil rate of duty does not affect the availing of Modvat credit on the date of entitlement. If on the date of entitlement, there is no illegality or invalidity in taking credit of such Modvat/Cenvat credit, the right to utilise such credit against future liability towards duty become indefeasible and it is not liable to be reversed in the contingency discussed above." 20. On perusal of the Rule 6 of Rules and the corresponding Rules, as mentioned above, we are of the view that the Appellants had correctly taken the credit and utilised, when the final product was dutiable and there is no requirement to reverse the credit on final product becoming exempt and such credit cannot be recovered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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