2015 (1) TMI 336 - HC - Central Excise

Manufacturer entitled to retain Cenvat credit for exempt goods under excise law

Commissioner of Central Excise, Chandigarh Versus M/s. Saboo Ispat Pvt. Ltd.

The court held that a manufacturer is not required to reverse the Cenvat credit taken for inputs used in manufacturing goods exempted from excise duty. ... Reversal of CENVAT Credit - Whether a manufacturer is required to reverse/pay the amount equivalent to the Cenvat credit taken by him in respect of inputs and capital goods which are proved to have been used in the manufacture of goods which are exempted from excise duty in view of the provisions of Rule 6(1) of Cenvat Credit Rules, 2004 which provide that no credit can be taken in respect of inputs which are used in the manufacture of exempted goods - Held that:- Since the language of Rule 9(2) of the Cenvat Rules is identical to that of Rule 57H( 5) of the Excise Rules, we feel that the interpretation given by the Apex Court[1999 (8) TMI 920 - SUPREME COURT OF INDIA] has to apply in the present case also and, therefore, even though the final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Modvat credit already taken by it. - authority below, has upheld the order passed by the Commissioner (Appeals) holding that no reverse of Cenvat Credit is required to be given by the assessee. In view of law laid down by this Court, we see no reason to interfere with the impugned order. Substantial questions of law is answered accordingly - Decided against Revenue. Issues involved:Whether a manufacturer is required to reverse/pay the amount equivalent to the Cenvat credit taken in respect of inputs and capital goods used in the manufacture of goods exempted from excise duty.Analysis:The judgment delves into the issue of whether a manufacturer must reverse or pay the amount equivalent to the Cenvat credit taken for inputs and capital goods used in manufacturing goods exempted from excise duty. The case references a previous judgment by a Coordinate Bench regarding a similar matter. The appellant, engaged in manufacturing S.S. Ingots/Flats, had obtained Cenvat credit on inputs but opted for exemption from excise duty later. The appellant claimed a refund of the reversed modvat credit, which was rejected by the Assessing Officer. The appeal was accepted, stating that the modvat credit need not be reversed. The revenue approached the CESTAT, which dismissed the appeal citing a previous ruling. The argument focused on whether there was a rule allowing the department to seek reversal of the Modvat credit.The judgment further discusses a ruling by the Apex Court regarding the reversal of Modvat credit under Central Excise Rules. It emphasizes that unless the credit is illegally or irregularly taken, it remains valid and can be utilized by the manufacturer without time limitations. The court highlighted that there is no correlation between the raw material and the final product for credit utilization. Rule 9(2) of the Cenvat Rules was examined, aligning its interpretation with the Apex Court's decision. The judgment concurred with the Kerala and Rajasthan High Courts, stating that even if the final product is exempt from excise duty, the manufacturer should not be required to reverse the Modvat credit.In the present case, the authority upheld the decision that no reverse of Cenvat Credit was necessary, in line with the law laid down by the court. The judgment concluded by dismissing the appeal, affirming that the substantial questions of law were answered accordingly. The ruling provides clarity on the issue of reversing Cenvat credit in cases of goods exempted from excise duty, aligning with previous legal interpretations and upholding the manufacturer's entitlement to the credit.