2017 (1) TMI 540 - AT - Central Excise

Tribunal rules in favor of appellant, no reversal of cenvat credit on inputs in finished goods.

The Tribunal allowed the appellant's appeal, setting aside the Commissioner (Appeals) order. It ruled that the appellant was not required to reverse the ... Reversal of CENVAT credit - credit taken on inputs contained in the finished goods and semi finished goods lying in the stock - the decision of Albert David Ltd. [2002 (11) TMI 144 - CEGAT, COURT NO. III, NEW DELHI] is not applicable in the instant case as the provision for payment of equivalent amount of credit was introduced in CCR, 2004 on 1.3.2007, whereas the period involved in this case is 31.7.2005. Held that: - the issue in the present case is squarely covered by the judgement of the Hon’ble Punjab and Haryana High Court in the case of CCE, Panchkula vs. HMT Ltd.[2010 (4) TMI 1036 - PUNJAB AND HARYANA HIGH COURT], where it was held that the assessee has paid the duty on inputs used in the indicated manufacturing of final goods, the assessee has maintained separate accounts/record, duly entered credit of duty-paid on the inputs in manufacture of final goods and validly availed the Cenvat credit. Therefore, the same cannot be reversed on the ground that the final product (i.e. agricultural Tractors) were subsequently exempted from tax. Appeal allowed - decided in favor of appellant. Issues:- Interpretation of Notification No.30/2004-CE and Notification No.29/2004-CE for clearance of finished goods- Reversal of cenvat credit on inputs contained in finished goods and semi-finished goods- Applicability of equivalent amount of credit provision in Cenvat Credit Rules, 2004- Comparison with relevant judicial pronouncements from Punjab and Haryana High Court and Madras High CourtAnalysis:1. Interpretation of Notifications: The appellants, engaged in manufacturing cotton yarn, opted for clearance under Notification No.30/2004-CE and Notification No.29/2004-CE simultaneously. They reversed cenvat credit on stock but omitted to consider duty on inputs in finished and semi-finished goods. The Revenue demanded recovery of the omitted credit, along with interest and penalty under section 11AC. The Commissioner (Appeals) upheld this decision, leading to the appeal before the Tribunal.2. Reversal of Cenvat Credit: The appellant contested the reversal of credit on inputs in finished goods, arguing that the notifications did not require such reversal. The Tribunal noted that the provision for equivalent credit was introduced in Cenvat Credit Rules, 2004 on 1.3.2007, while the case pertained to 31.7.2005. Citing the Punjab and Haryana High Court judgment, the Tribunal ruled that if duty was paid on inputs and valid credit availed, it cannot be reversed due to subsequent exemption of final products.3. Applicability of Equivalent Credit Provision: The Tribunal emphasized that the case was not governed by the Albert David Ltd. judgment, as the relevant provision was introduced post the period in question. Referring to the Madras High Court decision, the Tribunal highlighted that there need not be a direct correlation between inputs and cleared goods for credit reversal. The correct understanding was that no credit could be taken for inputs received after the final goods became exempt from duty.4. Comparison with Judicial Pronouncements: Relying on the judgments from the Punjab and Haryana High Court and Madras High Court, the Tribunal set aside the Commissioner (Appeals) order and allowed the appellant's appeal. The decisions emphasized that if duty was paid on inputs and valid credit availed, it should not be reversed due to subsequent exemption of final products.In conclusion, the Tribunal's detailed analysis focused on the interpretation of notifications, reversal of cenvat credit, the applicability of equivalent credit provisions, and comparisons with relevant judicial pronouncements to provide a comprehensive resolution in favor of the appellant.