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TMI Blog2025 (1) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... granted by a Notification under Section 5A of the Central Excise Act, 1944. The said Rule 11 (3) (ii)) can not be said to be applicable to Notification Nos. 29/2004-CE and 30/2004-CE. This is clear from the plain use of the words exempted absolutely in the said sub-rule. The accumulated credit was due to the fact that the petitioners had cleared their final product by paying central excise duty @ 8% and had simultaneously availed Cenvat credit on the raw materials used as inputs @ 16% under Notification No. 29/2004 . For the first time, as on 8.3.2006, the petitioners had reversed the Cenvat credit involved in the closing stock of inputs, finish product and yarn westage and balance amount of Cenvat credit was carrried forward. Thus, the petitioners had rightly carried forward its Cenvat credit balance. Further, since Rule 11 (3)(ii) of Cenvat Credit Rules, 2004 was introduced vide Notification No. 10/2007 dated 1.3.2007, and Notification No. 30/2004 does not provide that unutilized credit is prohibited from being carried forward, there could be no question of lapse of credit lying as balance in the Cenvat credit account of the petitioners in the month of April, 2007. Conclusion - C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. Texturized yarn under exemption Notification No. 29/2004-CE and was paying central excise duty at the rate of 8% on clearance of the same. 4.2. For the period under consideration, there was no such condition in Notification No. 29/2004 that CENVAT credit cannot be availed by the petitioners for paying central excise duty under the said notification. Therefore, the petitioners cleared the final product by paying central excise duty at the rate of 8% and simultaneously availed Cenvat credit on the raw material used as inputs. The effective rate of Central Excise Duty on the raw material was 16% vide Central Excise Tariff Act, 1994. 4.3. Thereafter the Petitioners on 19/12/2009 availed CENVAT credit on the inputs and cleared the final product by paying the amount of duty under Notification No. 29/2004. Also, the Petitioners were simultaneously clearing final product under Notification No. 30/2004 for which separate records were maintained. 4.4. The Petitioners in pursuance of the aforesaid letter submitted that the balance of CENVAT credit lying in the CENVAT credit accounts is a result of 16% duty on raw materials i.e. POY and 8% Central Excise Duty on their final products i.e. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Department. 6.1. He has further submitted that the impugned findings of the Revision authority, that the Notification 30/2004 contemplate an absolute exemption and therefore, the entire Cenvat Credit would lapse under Rule 11 (3) of the Central Excise Rules is per se incorrect, since admittedly there is no absolute exemption contemplated in Notification No. 30/2004 in the first place, but the exemption is conditional with the condition not to avail credit on inputs and also available to be simultaneously availed with notification 29/2004, which notification clearly permitted availment of credit at the same time, which credit therefore would not lapse. 6.2. He has further submitted that since both notifications could be availed simultaneously, the question of lapsing of credit availed under Notification 29/2004, would never arise and more so when no Cenvat credit was availed while operating under Notification 30/2004, at all. Hence, such findings and objections of the revision authority cannot stand and admittedly the duty paid from the Cenvat Credit availed under Notification 29/2004 would never lapse and would be available to pay duties on exported goods. 6.3 He has further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issibility of Cenvat credit lying with the since 01.04.2007. 8.5 For the first time in January 2013, the Jurisdictional Range Officer, while scrutinizing ER-1 returns clarified that a sum of Rs. 73,00,855/- is lying as balance in the petitioners Cenvat credit account as on February, 2012. Inspite of the best efforts of the petitioners to convenience the said authority to the contrary, a show cause notice dated 21.08.2013 was issued by the respondent-authority demanding an amount of Rs. 26,29,304/- utilized by the petitioners for payment of duty on the final product exported by them. In all, four show cause notices were issued to the petitioners as under:- Sr. No. SCN No. Rebate 1. F.No. V(CH54) 18-586/2013-Rebate dated 7/10/2013 Rs. 8,68,087/- 2. F.No. V(Ch54) 18-587/2013-Rebate dated 7/10/2013 Rs. 2,96,006/- 3. F.No. V(Ch54)18-588/2013-Rebate dated 7/10/2013 Rs. 11,57,450/- 4. F.No. V(Ch54)18-593/2013-Rebate dated 7/10/2013 Rs. 2,89,362/- 8.6 Eventually, the Adjudicating Authority rejected the refund claims under the common Order-In-Original. Being aggrieved by the said Order-In-Original, the petitioners filed appeal where the learned Commissioner (Appeals) allowed the rebate clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a magnitude that the excise duty required to be paid on final products could have exceeded the total input credit allowed. Since the excess credit could not have been utilised for payment of the excise duty on any other product, the unutilised credit was getting accumulated. The stand of the assessees is that they have utilised the facility of paying excise duty on the inputs and carried the credit towards excise duty payable on the finished products. For the purpose of utilisation of the credit, all vestitive (sic) facts or necessary incidents thereto have taken place prior to 16-3-1995 or utilisation of the finished products prior 16-3-1995. Thus the assessees became entitled to take the credit of the input instantaneously once the input is received in the factory on the basis of the existing Scheme. Now by application of Rule 57-F(4-A), the credit attributable to inputs already used in the manufacture of the final products and the final products which have already been cleared from the factory alone is sought to be lapsed, that is, the amount that is sought to be lapsed relates to the inputs already used in the manufacture of the final products but the final products have alr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er goods. 8.8 In the case of Collector Vs. Dai Ichi Karkaria Ltd. [1999 (112) ELT 353 (SC)], the Hon ble Apex Court has recorded categorical findings as under:- Rule 57G provides that the manufacturer intending to take credit of duty paid on inputs must file a declaration with the concerned excise officer indicating what the final products are that are manufactured in its factory and the inputs intended to be used therein and obtain an acknowledgement thereof. The manufacturer, having filed the declaration and obtained the acknowledgement, can take credit for the duty on the inputs received by him. Rule 57I provides for the recovery of credit wrongly availed of or utilised in an irregular manner. The manufacturer is then required to show cause why he should not be disallowed such credit, or, if it has utilised it, why its value should not be recovered from him. After considering the reply, the concerned excise officer is empowered to make the appropriate order in such terms. 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le (3A), liability to pay interest for the default period as per sub-rule (3) of rule 8 continues. Sub-rule (3A) is basically a mechanism for stringent recovery and does not create a new liability unless this mechanism itself is breached. In such a mechanism to provide for withdrawal of CENVAT credit facility for paying the duty borders to creating a penalty. Insisting on an assessee in default to clear all consignments on payment of duty would be a perfectly legitimate measure. However, to insist that he must pay such duty without utilising CENVAT credit which is nothing but the duty on various inputs already paid by him would be a restriction so harsh and out of proportion to the aim sought to be achieved, the same must be held to be wholly arbitrary and unreasonable. We may recall, the delegated legislature in its wisdom now dismantled this entire mechanism and instead has provided for penalty at the rate of 1% per month on delayed payment of duty. 36. In the result, the condition contained in sub-rule (3A) of rule 8 for payment of duty without utilizing the cenvat credit till an assessee pays the outstanding amount including interest is declared unconstitutional. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come into existence in respect of which the earlier scheme was applied under which the assessees had availed of the credit facility for payment of taxes. Any manner or mode of application of the said rule would result in affecting the rights of the assessees. The Hon'ble Supreme Court further observed that Section 37 of the Act does not enable the authorities concerned to make a rule which cannot be said to be applied to the goods manufactured prior to 16.3.1995 on which duty had been paid and credit facility thereto has been availed of for the purpose of manufacture of further goods. The Court further observed that when on the strength of the rules available certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the scheme under which the duty had been paid on the manufacture products and if such a situation is sought to be altered, necessarily it follows that right, which had accrued to a party such as availability of a scheme, is affected and, in particular it loses sight of the fact that the provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te address with which they intend to file claim of rebate. 8.3 The following documents shall be required for filing claim of rebate: A request on the letterhead of the exporter containing claim of rebate, A.R.E. 1 numbers and dates, corresponding invoice numbers and dates amount of rebate on each A.R.E. 1 and its calculations, original copy of the A.R.E.1, invoice issued under rule 11, self-attested copy of shipping Bill, self-attested copy of Bill of Lading, disclaimer certificate (in case where claimant in other than exporter) 8.4 After satisfying himself that the goods cleared for export under the relevant A.R.E. 1 applications mentioned in the claim were actually exported, as evident by the original and duplicate copies of A.R.E.1 duly certified by Customs, and that the goods are of 'duty paid' character as certified on the triplicate copy of A.R.E. 1 received from the jurisdictional Superintendent of Central Excise (Range Office), the rebate sanctioning authority will sanction the rebate, in part or full. In case of any reduction or rejection of the claim, an opportunity shall be provided to the exporter to explain the case and reasoned order shall be issued. 8.5 Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 (3)(ii) the said final product has been exempted absolutely under section 5A of the Act, and after deducting the said amount from the balance of CENVAT credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported. 8.14 This Court, in the case of the Commissioner, CGST and Central Excise Vs. M/s. Welspun India Ltd. Reported in Tax Appeal No.775 of 2019 has held as under:- 10. Further, once the Tribunal has come to the conclusion that refund which was granted to the respondent assessee has become final in view of Rule 6 (6) of the Rules 2004, lapsing of cenvat credit provided under Rule 11 (3) related to goods already exported would not be applicable. Therefore, invocation of Rule 11 (3) of the Rules 2004 is rightly held to be not applicable in the facts of the case. 10. A conjoint interpretation of the aforesaid provisions of law makes it clear that Rule 11 (3) (ii) of the Cenvat Credit Rules, 2004 is attracted only if there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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