2007 (10) TMI 203 - HC - Central Excise

Assessee not required to reverse cenvat credit on opting out of scheme

The High Court found that the assessee was not required to reverse the cenvat credit amount when opting out of the cenvat credit scheme. The court agreed ... Cenvat credit reversal on inputs in stock - Opting out of Cenvat Credit Scheme - Utilisation of cenvat credit against duty on final products - Absence of one-to-one relationship between inputs and final products - Application of precedent in Dai Ichi KarkariaCenvat credit reversal on inputs in stock - Utilisation of cenvat credit against duty on final products - Absence of one-to-one relationship between inputs and final products - Whether the assessee was required to reverse cenvat credit on inputs, inputs in process and inputs contained in finished goods lying in stock on the date of opting out of the cenvat scheme where the credit had been availed and utilised for payment of duty on final products. - HELD THAT: - The Court accepted the factual findings of the lower authorities that the assessee had correctly availed and utilised the cenvat credit of duty paid on the inputs for payment of duty on the final products when those final products were chargeable to excise duty. It was also found that there was no one-to-one relationship between particular inputs and particular final products so that the credit could be confined to a specific raw material. Applying the principle in Dai Ichi Karkaria, the Court held that where credit has been legitimately utilised for duty on finished goods chargeable to excise, reversal of cenvat credit in respect of inputs lying in stock is not required merely because the assessee opted out of the cenvat scheme; the demand based on reversal was therefore unsustainable. [Paras 3, 5]The demand for reversal of cenvat credit in respect of the inputs in stock was not sustainable and therefore the assessee was not required to reverse the said credit.Final Conclusion: Appeals dismissed; the findings that the assessee had validly availed and utilised cenvat credit and therefore was not liable to reverse the credit on inputs in stock were upheld. Issues:1. Whether cash payment/PLA is required in the absence of sufficient balance to reverse cenvat credit on inputs when opting out of the cenvat credit scheme.Analysis:The case involved the question of whether an assessee was required to pay back/reverse the cenvat credit availed on inputs, inputs in process, and inputs contained in finished goods when opting out of the cenvat credit scheme. The appellant-revenue contended that the assessee was obligated to reverse the cenvat credit, leading to demands being raised against them. The Commissioner (Appeals) upheld a portion of the demand but set aside another part, reducing the penalty imposed. The Commissioner's decision was based on the assessee correctly availing and utilizing the duty credit on inputs for paying duty on final products, as upheld by the Tribunal. The Tribunal also relied on a Supreme Court judgment in a similar case.The High Court, after hearing arguments, found no legal question warranting admission of the appeal. It noted the factual findings that the assessee had appropriately utilized duty credits on inputs for products subject to excise duty, without a direct correlation between specific inputs and final products. The court agreed that the assessee was not required to reverse the cenvat credit amount. The judgment in Dai Ichi Karkaria's case was deemed applicable and correctly applied. Consequently, the appeals were dismissed as lacking merit, affirming the Tribunal's decision.