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of <h1>Tribunal Upheld: Cenvat Credit on Exempted Tractors Not Reversible Pre-Exemption</h1> <h3>Commissioner of Central Excise, Bangalore-II, Commissionerate Versus Tafe Ltd. (Tractor Division)</h3> Commissioner of Central Excise, Bangalore-II, Commissionerate Versus Tafe Ltd. (Tractor Division) - 2011 (268) E.L.T. 49 (Kar.) , 2012 (26) S.T.R. 160 ... Issues:Challenge to Tribunal's order on Cenvat credit reversal for exempted tractors.Analysis:1. The appeal by the revenue contested the Tribunal's decision on Cenvat credit irreversibility for exempted tractors. The Tribunal ruled that legally taken Cenvat credit cannot be reversed even if the final product becomes exempt from duty, citing the Collector of Central Excise v. Dai Ichi Karkaria Ltd. judgment. The revenue demanded recovery of Rs. 2,09,84,356 from the assessee due to the exemption of tractors from duty.2. The assessee, M/s. TAFE Limited, objected to the demand, but the adjudicating authority upheld it. The Tribunal, following the Dai Ichi Karkaria Ltd. case, allowed the appeal, stating that Cenvat credit need not be reversed for exempted final products if legally taken. The revenue challenged this decision, leading to the current appeal before the High Court.3. The High Court framed the substantial question of law concerning the interpretation of Rule 3 of the Cenvat Credit Rules, 2002. The revenue argued that since tractors were exempted from duty, the Cenvat credit availed by the assessee on inputs used in manufacturing the exempted tractors should be reversed. They contended that the Tribunal erred in interfering with the adjudicating authority's order.4. Referring to the Dai Ichi Karkaria Ltd. case, the High Court highlighted the Apex Court's interpretation that once Cenvat credit is legally taken and utilized on dutiable final products, it need not be reversed if the final product becomes exempt subsequently. The Court emphasized that the law does not provide for the reversal of Cenvat credit legally availed on inputs used before the exemption date, even if the final product is exempted from duty. Therefore, the Tribunal's decision was upheld, and the substantial question of law was answered in favor of the assessee.5. The High Court also cited the Punjab and Haryana High Court's judgment in a similar case, emphasizing that legally taken input credit on dutiable final products need not be reversed upon subsequent exemption. The Court reiterated that the Cenvat credit availed on inputs until the exemption date remains with the assessee, and authorities cannot claim reversal of such credit post-exemption. The judgment supported the Tribunal's decision against the revenue's appeal, confirming the irreversibility of Cenvat credit in this scenario.
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