2018 (10) TMI 11 - AT - Central Excise

Tribunal Upholds Conditional Exemption Decision Under Cenvat Credit Rules

The Tribunal upheld the Commissioner (Appeals) decision in favor of the respondent, ruling that opting for conditional exemption under Notification No. ... Transitional Credit - benefit of N/N. 30/2004 dated 09.07.2004 - Revenue was of the view that consequent upon opting for the exemption notification, the respondent will be liable to follow the transitional provision outlined in Rule 11(3)(ii) of the Cenvat Credit Rules, 2004 - whether the respondent will be covered by the provisions of Rule 11(3)(i) or 11(3)(ii)? Held that:- The identical issue has been considered in detail in the case laws relied by the respondent. In the case of Jansons Textile Processors [2018 (7) TMI 850 - CESTAT CHENNAI], the Chennai Bench of the Tribunal has taken the view that in case of conditional exemption such as exemption under Notification No. 30/2004, the assessee will be covered only by Rule 11(3)(i). Appeal dismissed - decided against Revenue. Issues:1. Whether the respondent is liable to follow the transitional provision outlined in Rule 11(3)(ii) of the Cenvat Credit Rules, 2004 after opting for an exemption notification.2. Whether the respondent will be covered by Rule 11(3)(i) or 11(3)(ii) of the Cenvat Credit Rules, 2004.Issue 1:The appeals were filed by Revenue against the Order-in-Appeal passed by the Commissioner, Central Excise & Central Goods and Service Tax, Udaipur. The respondent, engaged in manufacturing cotton and polyester yarn, had availed cenvat credit on inputs and input services until March 2013. From April 2013, they opted for an exemption notification, ceasing to avail the cenvat credit benefit. Revenue contended that the respondent should follow the transitional provision under Rule 11(3)(ii) of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) set aside the demand, leading to the present appeals by Revenue. The Revenue argued that the respondent, by claiming exemption under Notification No. 30/2004, was required to follow Rule 11(3)(ii). The respondent, represented by an advocate, argued that the exemption was conditional and fell under Rule 11(3)(i), not requiring the lapsing of cenvat credit balance. The Tribunal found that the respondent opting for conditional exemption fell under Rule 11(3)(i), as established in previous case laws, and upheld the Commissioner (Appeals) decision, rejecting the Revenue's appeals.Issue 2:The key question was whether the respondent would be covered by Rule 11(3)(i) or 11(3)(ii) of the Cenvat Credit Rules, 2004 after opting for an exemption notification. The Tribunal referred to previous case laws, including Jansons Textile Processors and Wearit Global Ltd., where it was established that in cases of conditional exemption, like under Notification No. 30/2004, the assessee would be covered by Rule 11(3)(i) and not 11(3)(ii). The Tribunal concurred with the settled legal position that in instances of conditional exemption, the cenvat credit balance would not lapse, as per Rule 11(3)(i). Therefore, the Tribunal found no fault in the Commissioner (Appeals) decision and rejected the Revenue's appeals, maintaining the impugned order.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision based on the interpretation of relevant legal provisions and precedents.