Court modifies judgment by deleting reversal of credit sentence upon remission of duty. Rule made absolute.

The court allowed the application for review, modifying the Full Bench's judgment by deleting the sentence regarding the reversal of credit upon remission of duty. The rule was made absolute, with no order as to costs.

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Issues Involved:
1. Applicability of Rule 3 of the Cenvat Credit Rules, 2004 and Rule 21 of the Central Excise Rules, 2002 regarding reversal of Cenvat Credit.
2. Validity of the Full Bench's decision on the requirement of reversing Cenvat Credit upon remission of duty.
3. Review and modification of the Full Bench's judgment dated 29.08.2012.

Issue-wise Detailed Analysis:

1. Applicability of Rule 3 of the Cenvat Credit Rules, 2004 and Rule 21 of the Central Excise Rules, 2002 regarding reversal of Cenvat Credit:
The central question referred to the Larger Bench was whether, according to Rule 3 of the Cenvat Credit Rules, 2004 and Rule 21 of the Central Excise Rules, 2002, the decisions in the cases of Commissioner of Central Excise and Customs, Ahmedabad-I v. GDN Garments and Commissioner of Central Excise and Customs v. Biopac India Corporation Ltd. correctly held that manufacturers are not required to reverse the Cenvat Credit on inputs used in manufacturing final products, even after remission of duty upon destruction of the final product. The Larger Bench concluded that sub-rule (5C) of Rule 3 of the Cenvat Credit Rules, effective from September 7, 2007, introduced a provision for reversal of credit if the finished product becomes unfit for human consumption, unless a condition for remission of duty under Rule 21 of the Central Excise Rules, 2002, explicitly states that the credit already taken is to be reversed.

2. Validity of the Full Bench's decision on the requirement of reversing Cenvat Credit upon remission of duty:
The applicant sought modification of the Full Bench's judgment, arguing that prior to the introduction of sub-rule (5C) of Rule 3 of the Cenvat Credit Rules, there was no provision for the reversal of credit by the excise authorities. The Full Bench had acknowledged this, stating that the credit accrued at the moment the raw material or input was used in manufacturing a final product that was neither exempt from duty nor carried a nil rate of duty. Consequently, the amendment creating a new right in favor of the revenue was deemed prospective. The applicant contended that the operative part of the judgment, which allowed for the possibility of reversal if a condition was imposed under Rule 21, conflicted with the main judgment's finding that no such provision existed before September 7, 2007.

3. Review and modification of the Full Bench's judgment dated 29.08.2012:
The applicant argued that the Full Bench's judgment contained an error apparent on the face of the record, as it conflicted with its own findings. The court noted that the Full Bench had clearly held that prior to September 7, 2007, there was no statutory provision permitting the revenue authorities to direct reversal of credit already taken. Therefore, the question of imposing any condition for reversal while granting remission of duty under Rule 21 would not arise. The court agreed that the conflicting part of the judgment appeared to be an inadvertent error and needed to be rectified. The court cited precedents from the Supreme Court, emphasizing that review jurisdiction could be exercised to correct errors apparent on the record or errors of law.

Conclusion:
The court allowed the application for review, modifying the Full Bench's judgment by deleting the sentence "unless any condition has been imposed for remission of duty in terms of Rule 21 of the Central Excise Rules, 2002 making it clear that the credit already taken is to be reversed" from paragraph 20 of the judgment. The rule was made absolute, with no order as to costs.

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