2016 (9) TMI 626 - AT - Central Excise

Appellate tribunal allows pre-exemption Cenvat credits: Rule 11(3) prospective from 01.03.2007 (3)

The appellate tribunal ruled in favor of the appellant, allowing them to utilize the accumulated Cenvat credit of duty earned before opting for exemption ... Whether the appellant would be entitled to utilize the cenvat credit of duty accumulated prior to opting for Notification No. 30/04-CE dated 09.07.2004 - appellant paid duty on their final products making use of Cenvat Credit - opted to avail exemption under Notification 30/2004-CE w.e.f. from 03.08.2004 - appellant argued that cenvat credit forward from 2004 has been rightly earned by them and that the amendment introduced by the provision of Rules 11(3) of the Cenvat Credit Rules, 2004 will have only prospective effect and cannot be used to lapse the credits accumulated by them - Held that:- the judgment of Hon’ble High Court of Karnataka in the case of Commissioner of C. Ex. Vs. Gokldas Intimate Wear [2011 (4) TMI 1123 - KARNATAKA HIGH COURT] squarely covers the issue and it stands decided in favour of the appellant. Therefore, the appellant will be entitled to utilize the cenvat credit of duty accumulated prior to opting for Notification No. 30/04-CE dated 09.07.2004. - Decided in favour of appellant Issues:1. Interpretation of Rule 11(3) of the Cenvat Credit Rules, 2004 regarding the lapsing of accumulated credits.2. Applicability of transitional provisions in Cenvat Credit Rules, 2004 to credits earned prior to the introduction of Rule 11(3).3. Challenge against the disallowance of carrying forward credit by the adjudicating authority.Analysis:1. The appellant, a manufacturer of woolen fabrics and other products, opted for exemption under notification 30/2004-CE dated 09.07.2004, which prohibited taking credit on duty on inputs under Cenvat Credit Rules. The issue revolved around the interpretation of Rule 11(3) introduced w.e.f. 01.03.2007, which required payment of Cenvat Credit if opting for exemption. The adjudicating authority disallowed carrying forward credits, citing the lapse of accumulated credits post the introduction of Rule 11(3). The appellate authority upheld this decision.2. The appellant contended that credits earned prior to the introduction of Rule 11(3) should not lapse. They argued that the amendment should have prospective effect and not affect previously accumulated credits. Citing a judgment of the Hon'ble High Court of Karnataka, they emphasized that once credits are legally taken and utilized, they should not be reversed due to subsequent exemptions.3. The appellate tribunal analyzed the Karnataka High Court's decision, which held that the amendment introducing Rule 11(3) had prospective application from 01.03.2007. As the appellant's case pertained to a period before this date, the tribunal ruled in favor of the appellant. The tribunal concluded that the appellant could utilize the accumulated Cenvat credit of duty earned before opting for the exemption under notification 30/2004-CE dated 09.07.2004.This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the tribunal's decision, providing a comprehensive understanding of the case.