2025 (3) TMI 195 - HC - Central Excise

Cenvat credit does not lapse under Rule 11(3)(i) only sub-clause (ii) provides for credit lapse

The Assistant Commissioner of Central Excise, Commissioner of Central Excise, Madurai Versus M/s. Valli Textile Mills, (A unit of Loyal Textile Mills Ltd), Rep. by its AGM-Marketing Mr. K. Lakshmana Sankar, Joint Secretary to the Government of India, New Delhi, The Commissioner of Central Excise (Appeals)

The HC held that cenvat credit did not lapse under Rule 11(3)(i) of the Cenvat Credit Rules, 2004, distinguishing sub-clause (i) from sub-clause (ii). The ... Lapse of cenvat credit under Rule 11(3) of the Cenvat Credit Rules, 2004 - rebate claim of duty paid on exported goods - HELD THAT:- Sub-clause (i) of sub-rule 3 of Rule 11 will have to be treated as distinct and separate from sub-clause (ii). Sub-clause (ii) alone provides for lapse of cenvat credit. Sub-clause (i) does not provide for lapse. The appellants have conceded that the case on hand falls only sub-clause (i) of sub-rule 3 of Rule 11 of CCR, 2004. The logical consequence is that the subject cenvat credit cannot be treated as having lapsed. The argument of the learned standing counsel that sub-clause (ii) should be read integrally with sub-clause (i) stands rejected. The provision for lapse set out in sub-clause (ii) cannot be applied in respect of the situation covered by sub-clause(i). Whether these writ appeals are competent? - HELD THAT:- The latest Instruction dated 06.08.2024 reads that appeal shall not be filed in the CESTAT, High Court and Supreme Court if the case fell within the prescribed monetary limits. Exceptions have also been carved out. It is noticed that the direction is “appeal shall not be filed”. If in contravention of the instruction, an appeal is filed, the assessee can bring it to the notice of the concerned authority and seek withdrawal of the appeal. It may not be open to the tribunal or the High Court to dismiss the appeal filed by the revenue by citing the said Instruction. Once the appeal has been filed, it is required to necessarily deal with the issue on merits. Conclusion - i) The cenvat credit of the company did not lapse under Rule 11(3)(i). ii) Once an appeal is filed, it must be heard on its merits, even if it falls within the prescribed monetary limits set by the Central Board of Indirect Taxes and Customs. Appeal dismissed. The case involves a dispute between the revenue (appellants) and a company engaged in the manufacture of textile products (respondents) regarding the lapse of cenvat credit under Rule 11(3) of the Cenvat Credit Rules, 2004. The company had filed rebate claims for duty paid on exported goods, which were rejected by the revenue. The revenue contended that the company's cenvat credit had lapsed under Rule 11(3)(i) due to the exemption claimed by the company under Section 5A of the Central Excise Act, 1944.The key issues considered in the judgment are:1. Whether the cenvat credit of the company lapsed under Rule 11(3)(i) of the Cenvat Credit Rules, 2004.2. The interpretation of the punctuation in Rule 11(3) and its impact on the application of the rule.3. The competency of the writ appeals based on the monetary limits set by the Central Board of Indirect Taxes and Customs.The Court analyzed the relevant legal framework, precedents, and evidence to reach its conclusions. It noted that Rule 11(3) has two sub-clauses, with sub-clause (i) not providing for the lapse of cenvat credit. The Court emphasized the importance of punctuation in statutory interpretation, citing precedents that supported treating sub-clauses as distinct and separate. It rejected the revenue's argument that sub-clause (ii) should be read integrally with sub-clause (i) and held that the cenvat credit could not be treated as lapsed under sub-clause (ii) in the present case.Regarding the competency of the writ appeals, the Court clarified that once an appeal is filed, it must be heard on its merits, even if it falls within the prescribed monetary limits set by the Central Board of Indirect Taxes and Customs. The Court dismissed the writ appeals, stating that granting relief to the company did not imply an endorsement of the appellate authority's view or an examination of the retrospective application of Rule 11(3) of the Cenvat Credit Rules, 2004.In conclusion, the Court held that the cenvat credit of the company did not lapse under Rule 11(3)(i) and dismissed the writ appeals without costs. The judgment emphasizes the importance of punctuation in statutory interpretation and upholds the company's position in the dispute with the revenue.