2026 (3) TMI 1064 - HC - Central Excise

CENVAT credit reversal treated as non availment, preserving entitlement under the exemption notification and restoring the appeal order.

Reversal of CENVAT credit before utilization is treated as non availment for purposes of entitlement under Notification No.30/2004 C.E.; applying that ... Validity of revisional order - application of precedent of the supreme court - Reversal of CENVAT credit before utilization amounts to non availment of credit - precondition for availing exemption - exemption under Notification No.30/2004-C.E. - HELD THAT:- The Revisional Authority has basically relied on the circular dated 01.02.2007 (Annexure P-18) by which it was clarified that non-availment of credit on inputs is a precondition for availing exemption under this notification, and if manufacturers avail input tax credit, they would be ineligible for exemption under this notification and reversal of credit on a later date would not suffice to make them eligible for this exemption. The Revisional Authority did not notice the subsequent circular dated 08.11.2007 (Annexure P-19) by which the circular dated 01.02.2007 has been superseded because of the judgment of the Apex Court in the case of Bombay Dyeing [2007 (8) TMI 2 - SUPREME COURT] The order passed by the Revisional Authority cannot be approved because the revisional authority did not consider the judgment passed by the Apex Court given in the case of Bombay Dyeing (supra) and circular dated 08.11.2007. Hence, the impugned order is unsustainable and accordingly, the petition is allowed and the impugned order dated 06.05.2010 (Annexure P-1) passed by the Ministry of Finance (Department of Revenue) (Revisional Authority) is set aside, and the order in the appeal is restored. No order as to cost. Final Conclusion: The revisional order was set aside and the appellate order restored, the Court holding that reversal of CENVAT credit before utilization constitutes non-availment for the purpose of the exemption and that the Revisional Authority erred in ignoring the Supreme Court decision and the subsequent Board circular. Issues: Whether the revisional order dated 06.05.2010 setting aside the order in appeal and denying higher drawback under Notification No.30/2004-C.E. is sustainable where (i) the exporter had reversed CENVAT credit before utilization and (ii) the Supreme Court decision in Bombay Dyeing and the Board circular dated 08.11.2007 are applicable.Analysis: The question requires examination of whether reversal of CENVAT credit before utilization amounts to non availment of credit for the purpose of claiming exemption under Notification No.30/2004-C.E., and whether the revisional authority could rely on the earlier Board circular dated 01.02.2007 without taking into account the Supreme Court decision in Bombay Dyeing and the subsequent Board circular dated 08.11.2007 which amended the earlier clarification in light of that decision. The analysis focuses on the temporal effect of credit reversal on entitlement to exemption and on whether the revisional authority applied the correct circular and judicial precedent when deciding the revision.Conclusion: The revisional order dated 06.05.2010 is unsustainable because reversal of CENVAT credit before utilization is to be treated as non availment for the purposes of Notification No.30/2004-C.E., and the revisional authority failed to consider the Supreme Court judgment in Bombay Dyeing and the Board circular dated 08.11.2007 which amended the earlier circular. The impugned revisional order is set aside and the order in appeal is restored.Ratio Decidendi: Where CENVAT credit taken on inputs is reversed before utilization, it is treated as credit not having been taken and does not disentitle the claimant from benefits under the relevant exemption notification.