2008 (11) TMI 604 - AT - Central Excise

Tribunal upholds reversal of CENVAT credit for texturisers, allows use of excess credit for duty payment

The Tribunal confirmed the requirement for independent texturisers to reverse CENVAT credit as per Rule 57AG(3)(a) and allowed utilization of excess ... - Issues Involved:1. Applicability of Rule 57AG(3)(a) regarding reversal of CENVAT credit.2. Interpretation and application of Rule 57AB(2)(c).3. Utilization of excess CENVAT credit post-reversal for payment of duty under Notification No. 6/2000.4. Imposition of penalty on the appellants.Detailed Analysis:1. Applicability of Rule 57AG(3)(a) Regarding Reversal of CENVAT CreditThe core issue revolves around the requirement for independent texturisers to reverse CENVAT credit in respect of inputs lying in stock or used in the manufacture of texturised yarn as of March 1, 2000, or thereafter. The Tribunal confirmed that the appellant must reverse the credit of Rs. 3,36,16,518/-, as the rule clearly mandates such reversal. The appellant's argument that the rule should not apply retrospectively was dismissed, as the Tribunal is bound by the provisions of the rules enacted by the Legislature.2. Interpretation and Application of Rule 57AB(2)(c)Rule 57AB(2)(c) prohibits CENVAT credit on inputs for texturised yarn manufactured by independent texturisers without the facility to manufacture partially oriented yarn. The Tribunal clarified that while this rule restricts taking credit on inputs post-1-4-2000, it does not mandate the lapsing of excess credit accumulated before this date. The Tribunal concluded that the excess credit remaining after the reversal of the amount as per Rule 57AG(3)(a) could still be utilized by the appellant.3. Utilization of Excess CENVAT Credit Post-Reversal for Payment of Duty under Notification No. 6/2000The appellants argued that they should be allowed to use the excess CENVAT credit for paying duty on finished goods under Notification No. 6/2000, which does not explicitly require payment out of PLA or cash. The Tribunal agreed, stating that the notification's condition only precludes taking new credit on inputs after 1-4-2000 but does not restrict using pre-existing credit. The Tribunal emphasized that the legislative intent should not override the plain language of the notification, which does not mandate payment from PLA or cash.4. Imposition of Penalty on the AppellantsThe Tribunal found that the issues involved were based on bona fide interpretations of the law and did not warrant penal action. Consequently, the penalty imposed on the appellants was set aside.Separate Judgments:- Member (Technical) B.S.V. Murthy's Dissent: Murthy disagreed with the utilization of CENVAT credit for duty payment under Notification No. 6/2000, arguing that Rule 57AB(2)(c) barred such utilization post-1-4-2000. He maintained that the appellants should pay duty from PLA.- Third Member (Judicial) P.G. Chacko's Opinion: Chacko concurred with Member (Judicial) Archana Wadhwa, emphasizing that the pre-existing CENVAT credit did not lapse and could be utilized for duty payment under the notification.Final Order:1. The demand of duty of Rs. 3,36,16,518/- against the appellant is confirmed.2. Excess CENVAT credit after reversal in terms of Rule 57AG(3)(a) is available for utilization.3. The appellants are entitled to use excess credit for duty payment under Notification No. 6/2000.4. The penalty imposed on the appellants is set aside.5. The appellant's liability will be quantified by the authorities following the law as decided.Conclusion:The Tribunal's majority decision allows the appellants to utilize excess CENVAT credit for paying duty on finished goods under Notification No. 6/2000, post-reversal of credit as mandated by Rule 57AG(3)(a). The penalty imposed on the appellants was also set aside.