Benefit under Notification No. 6/2002-CE - whether available if credit is reversed

PJ/Case Laws/2011-12/1184

Case: - COMMISSIONER OF C. EX. & CUSTOMS Vs FORAM GLAZED TILES

Citation: - 2011 (267) E.L.T. 461 (Guj.)

Issue: - Whether the assessee is eligible to claim benefit of Notification No. 6/2002-C. E. dated 1.3.2002 as amended by reversing the credit of duty paid on “inputs” after utilizing the same for clearance of ceramic tiles though the respondent has violated the mandatory condition

Brief fact: - Respondent and other manufacturers were engaged in manufacture of Ceramic glazed tiles. They availed the benefit of concessional rate of duty under Sr. No. 235 of Notification No. 6/2002-CE dated 01.03.2002 as amended by Notification No. 45/2003-CE dated 14.5.2003 in respect of clearance of final product.

Department alleged that the said exemption was not available to the Respondent & Other manufacturers on the ground that the benefit made available by way of exemption was conditional this wise that only if no credit of duty paid on the inputs used in or in relation to the manufacturer of such ceramic tiles is taken under Rule 3 and 11 of Cenvat Credit Rules, 2002/2004, this exemption under the notification can be claimed. And as respondent had already taken credit of duty paid on input, consequentially under the notification, concessional rate of duties would not be availed to him and to other manufacturers.

Department having found that this double benefit is already taken by respondent while clearing goods had deemed it appropriate to issue show cause notice on him. Respondent, before this notice, had already reversed credit availed by him on input. The Commissioner in its order-in-original in detail examined admissibility of exemption notification in a situation when the condition of notification allegedly have been contravened, when he had already availed cenvat credit on the inputs used in the manufacture of ceramic tiles. And it upheld the demand made under the show cause notice.

In appeal, the Tribunal upheld the claim of the respondent-assessee. It was held that respondent was eligible to claim benefit under Notification No. 6/2002-CE by reversing the credit of duty paid on Inputs after utilizing the same for clearance of ceramic tiles.

Revenue has challenged the order of the Tribunal before the High Court.

Appellant’s Contention:- Revenue submitted that present appeal and other such appeals arising from common order of the Commissioner is in favor of such kind of respondent who have unscrupulously availed benefit of the said notification and paid less percentage of duty which is 8%, instead of 16% payable, knowingly fully well that they had since already availed cenvat credit on input made available to them. It was also urged before the Court that since this was a deliberate and intentional act of enrichment to defeat revenue, the order of the Tribunal requires to be scrutinized in detail and deserves to be set aside.

Revenue through admitted that reversal of cenvat credit was done prior to the issuance of show cause notice. But that would not wipe off unjustified action of the respondent.

Reasoning of Judgment: - The High Court perused the orders passed by the Lower Authorities and the Tribunal and concluded that no question of law arises and there is no perversity in the order of the Tribunal.

The High Court held that it is impermissible to hold that “Once the credit is taken on any inputs which are brought inside the factory for being used either directly or indirectly in the manufacture of the final product, ceramic tiles or the credit is so availed on the inputs which are used in the manufacture of capital goods within the factory of production, the exemption under the said Notification is inadmissible. The cenvat credit has been availed by the manufacturers for fabrication and manufacture of capital goods” as held by the Adjudicating Authority.

It was held that the reliance placed by the Commissioner (Appeal) on the decision given in Chandrapur Magnet Wires (P) Ltd v/s Collector of C. Ex., Nagpur [1996 (81) ELT 3 (SC)] was not sustainable as the ratio laid down in the said case was distinguished on facts.

It was observed that the Tribunal had relied upon the judgment given in Commissioner of Central Excise v/s Ashima Dyecot Ltd [2008 (232) ELT 580 (Guj)] wherein it was held that reversal of credit even if it is subsequent to clearance or even after credit taken, would amount to non-availment of credit.

It was held that the Respondent had reversed the cenvat prior to issuance of show cause notice and while accepting said reversal, no challenge is made by the department to this act of respondent. Admittedly, on non-availment of the credit, manufacturer is entitled to the benefits emanating from notification which is of payment of reduced duty of 8% interest instead of payment of 16% duty. The court therefore was broadly in agreement with the conclusion in the decision of the Tribunal holding that issue is broadly covered by the decision of this Court in case of Ashima Dyecot Ltd.

Decision: -Appeal dismissed.

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PJ/Case Laws/2011-12/1184

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