Appellant entitled to exemption by reversing credit & paying interest; Tribunal orders remand for interest calculation.

The Tribunal found that the appellant, by being prepared to reverse the credit and pay interest on the amount availed, was entitled to exemption despite initially availing cenvat credit on certain items. The Tribunal noted the appellant's payment of Rs. 2 Lacs but highlighted the need to quantify the interest element on the cenvat credit. It was determined that if the appellant reversed the credit, paid interest, and adjusted against the Rs. 2 Lacs already paid, any shortfall could be addressed during de-novo adjudication. The Tribunal set aside the impugned order, allowing the appeal for remand to calculate and ensure payment of interest before a reasoned de-novo order is issued by the Adjudicating Authority.

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Issues involved:
The issue involved in the present case is whether the appellant is entitled to exemption under Notification No. 05/2006-CE despite availing cenvat credit on certain items.

Comprehensive details of the judgment:

Issue 1:
The appellant availed cenvat credit on Ceramic Roller and Bellow used in the manufacture of Roller Kiln, believing them to be parts of capital goods. The audit party objected, leading to a show cause notice proposing denial of exemption and demand of duty, penalty, and interest. The Adjudicating Authority confirmed the demand, leading to the appellant's appeal and stay application. The Tribunal directed a pre-deposit of Rs. 2 Lacs, which the appellant complied with.

Issue 2:
The appellant argued that the items on which cenvat credit was taken were parts used in the construction of roller kiln, classifiable under capital goods. The Adjudicating Authority denied exemption, considering the items as inputs. The appellant contended that the pre-deposit should be considered as a reversal of cenvat credit, making them eligible for the exemption. Citing precedents, the appellant sought restoration of the exemption.

Issue 3:
The Revenue reiterated the findings of the impugned order, opposing the appellant's contentions.

Judgment:
After considering submissions, the Tribunal found that the appellant's readiness to reverse the credit and pay interest on the amount availed was crucial. The appellant's payment of Rs. 2 Lacs was noted, but the interest element on the cenvat credit was yet to be quantified. The Tribunal held that if the appellant reversed the credit and paid interest, adjusting against the Rs. 2 Lacs already paid, any shortfall could be settled during de-novo adjudication. Citing legal precedents, including the Supreme Court's ruling in Chandrapur Magnet case, the Tribunal concluded that the appellant was entitled to the exemption. The impugned order was set aside, and the appeal allowed for remand to compute and ensure payment of interest before a reasoned de-novo order is passed by the Adjudicating Authority.

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