Whether Rule 11(3) of CCR, 2004 regarding reversal of credit taken on inputs used for manufacturing excisable goods that became exempted be applied retrospectively?

PJ/Case Law /2016-17/3418

Case:-COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS SURYALAXMI COTTON MILLS
Citation:-2017 (345) E.L.T. 310 (Tri. - Mumbai)
Brief facts:-The issue involved in the present case is that, due to the excisable goods become exempted, the appellant reversed Cenvat credit contained in the finished goods in process and final product. Part of the credit was reversed from Cenvat credit account and partly from PLA. Subsequently the appellant realized that Cenvat credit was not required to be reversed, they filed refund claim for an amount of Rs. 32,88,680/- and the same was rejected by the adjudicating authority vide order-in-original dated 26-4-2005. The respondent filed appeal before the Commissioner (Appeals) challenging the order-in-original and the learned Commissioner (Appeals) allowed the appeal of the appellant following the judgment of this Tribunal in the case ofCommissioner of Central Excise, Rajkot v. Ashok Iron and Steel Fabricators - 2002 (140) E.L.T. 277 which was upheld by the Supreme Court as reported in 2003 (156) E.L.T. A212 (S.C.). Aggrieved by the order of the Commissioner (Appeals) Revenue is before the Tribunal.

Appellant’s contention:-Shri V.K. Shastri, learned Asstt. Commissioner (AR) appearing on behalf of the Revenue reiterated the grounds of appeal. He submits that since the respondent availed exemption Notification No. 30/2004-C.E., dated 9-7-2004 which contained the condition that the notification shall not apply to the goods in respect of which credit of duty on inputs has been taken under the provisions of the Cenvat Credit Rules, 2002. Therefore, the Cenvat credit reversed by the respondent is in confirmation with the condition of Notification No. 30/2004-C.E. Therefore, there is no question of refund of the same. The Commissioner (Appeals) erred in allowing the appeal of the respondent.

Respondent’s contention:-Shri V.M. Doiphode, learned Counsel for the respondent submits that the present case is not on the eligibility of the Notification No. 30/2004-C.E. but the issue is whether the respondent was required to reverse the Cenvat credit which was availed prior to issuance of the notification. He submits that, as regard the provision for reversal of Cenvat credit in respect of the goods lying in stock with respect to the inputs contained in the finished goods and the provision was brought in the statute by insertion of sub-rule (3) of Rule 11 of Cenvat Credit Rules w.e.f. 1-3-2007 by way of amendment Notification No. 10/2007-C.E. (N.T.). Therefore, at the relevant period, in the present case, there was no provision for reversal of credit in case the products become exempted. He submitted that the very same issue has been settled in the following judgments.
i.          Tractor and Farm Equipment Ltd. v. Commissioner of Central Excise, Madurai-II - 2015 (320) E.L.T. 357 (Mad.)
ii.     Commissioner of Central Excise, Bangalore v. TAFE Ltd. (Tractor Division) - 2015 (322) E.L.T. 864 (Kar.)
iii.      Commissioner of Central Excise, Rajkot v. Ashok Iron and Steel Fabricators - 2002 (140) E.L.T. 277 (Tri.-LB)
iv.    Commissioner of Customs & Central Excise, Meerut-I v. APCO Pharma Ltd. - 2015 (319) E.L.T. 641 (Uttarakhand).

Reasoning of judgment:-We have carefully considered the submissions made by both the sides. The Tribunal found that at the time of exemption Notification No. 30/2004-C.E. came into effect, there was no provision for reversal of credit in respect of inputs contained in the said exempted goods or lying as such for the reason that credit was availed prior to issuance of the exemption notification and at the time of availment of credit there was no bar and the Cenvat credit availed was correct and legal. As regards the provision for reversal of Cenvat credit in the aforesaid circumstances, the same was specifically inserted vide Rule 11(3) w.e.f. 1-3-2007, which cannot be applied retrospectively. The issue is squarely covered by the judgments cited by the learned counsel. The Tribunal did not find any infirmity in the impugned order, hence, the same was upheld.

Decision:- Appeal dismissed.

Comment:-The gist of the case is that since during the disputed period of time, there was no provision for reversal of credit in respect of the inputs contained in finished goods stock subsequent to finished products being exempted, the assessee was entitled for refund of credit reversed by them. Hence, it was held that Cenvat credit availed by the assessee was correct and legal. Provision for reversal of credit which was inserted vide Rule 11(3) of Cenvat Credit Rules, 2004 w.e.f. 1-3-2007 could not be applied retrospectively. Therefore, the assessee was entitled to refund of credit wrongly reversed by him in accordance with Section 11B of Central Excise Act, 1944.

Prepared by:-Praniti Lalwani

Comments

PJ/Case Law /2016-17/3418

Post a Comment

Query