2024 (3) TMI 552

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....oods and spares procured from various vendors including imported spares were sold by the appellant under commercial tax invoices. The said activity was trading of the goods which was being carried out along with manufacture of the goods during the period from July 2009 to March 2014. With effect from 01.04.2011, trading activity was declared to be an exempted service. Appellant was availing cenvat credit of duty paid on inputs which was utilized for payment of central excise duty on the goods manufactured. Appellant was also availing cenvat credit of service tax paid on certain input services which were utilized by them for manufacture as well as trading purposes. Appellant was not maintaining separate accounts in respect of the components ....

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....that the fact of debiting the entire cenvat credit availed on common input services amounting to Rs.46,08,193/- has been recorded by the original authority at para 25.6 of the impugned order. Learned counsel for the appellant has relied on ruling by Hon'ble Supreme Court in the case of Chandrapur Magnet Wires (P) Ltd. reported in 1996 (81) ELT 3 (SC). By relying on the ruling of Hon'ble Supreme Court, he has argued that it was ruled by Hon'ble Supreme Court that when inadmissible cenvat credit availed is debited by the assesse, then the result is as if no credit was availed. He has submitted that before adjudication, the entire cenvat credit availed on common input services was debited by the appellant. Therefore, it amounts to not availing....

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....rse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There is no doubt that the assessee should have maintained separate accounts for duty free goods and the goods on which duty has to be paid. But our attention was drawn to a departmental circular letter on this problem in which it has been clarified by the Ministry of Finance as under: "3. The credit account under MODVAT rules may be maintained chapterwise, MODVAT credit is not available if the final products are exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products, final products which would be exempt from duty by a notification (e.g. an end use notification) and in....

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....sed in the manufacture of the final exempted product under Rule 57A. In other words, the claim for exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken credit of the duty paid on the inputs used in manufacture of these goods. 8. The appeal is therefore, allowed. The order of the Customs, Excise and Gold (Control) Appellate Tribunal dated 17th May, 1995 is set aside. There will be no order as to costs." It is very clear that Hon'ble Supreme Court has laid down that once a debit entry is made in respect of a credit entry, then the result is as if that credit entry was never made. In other words, the entire cenvat credit availed on common input services being debited before adjudication and at t....