TaxTMI 
TaxTMI 
2009 (12) TMI 170
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....short question which arises for decision is whether a manufacturer who has obtained credit of the Central Value Added Tax paid by him in respect of the raw material and inputs lying in stock or in process or contained in the final product lying in stock is required to refund/repay the credit when the final product is exempted from excise. The main argument of Shri Sandeep Sharma, learned Assistant Solicitor General of India is that the authorities below have not taken into consideration rule 9(2) of the Cenvat Rules. 3. A show-cause notice was issued to the assessee on 31-1-1997 asking it to reverse the Modvat credit of Rs. 93,584 on the inputs in hand and in process as well as on the inputs contained in the final product as on 23-7-1996....
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....T 277 (Trib. - LB). 6. The main argument of Sh. Sandeep Sharma, learned Assistant Solicitor General of India is that in the case of Ashok Iron & Steel Fabricators (supra), the Tribunal held that there was no rule which permitted the department to seek reversal of the Modvat credit. He relies upon rule 9(2) of the Cenvat Rules in this behalf. 7. It is pertinent to mention here that the Apex Court in Collector of Central Excise v. Dai Karkaria Ltd. 1999 (7) SCC 448 considered a similar question relating to the reversal of Modvat credit under Central Excise Rules, 1944, rule 57H(5) of the said rules reads as follows :— "(5) Where a manufacturer who opts for exemption from the whole of the duty of excise leviable on goods manufacture....
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....the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no correlation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available." (p. 458) 8. Rule 9(2) of the Cenvat Credit Rules reads as follows:— "(2) A manufacturer who opts for exemption from the whole of the duty of excise leviable on good....
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....oduct. But the end product is destroyed by fire before stage of its removal from factory premise. In such circumstances, no excise duty becomes payable on end product. Yet Modvat credit availed on inputs used in destroyed goods is not to be recalled. This is also suggestive of the fact the relevant date for considering exemption from duty of the end product in or in relation to which inputs are used is the date of its receipt in factory and condition is its actual use in or in relation to manufacture of end product by the manufacturer. The chargeability to duty or non-chargeability due to exemption or notified nil rate is to be considered at the stage before goods are actually produced, but on receipt of inputs intended to be used in manufa....