The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the manufacturer of polyester spun yarn is eligible to avail reversal of CENVAT credit of Excise Duty on exempt turnovers under rule 6(3) of the CENVAT Credit Rules(CCR),2004.
Suryauday Spinning Mills Ltd, the appellant assessee was engaged in the business of manufacturing polyester spun yarn (‘PSY’) falling under Chapter 55 of the Central Excise Tariff Act, 1985, using the duty paid Polyester staple fiber (‘PSF’) procured by them and entitled to benefit under Notification wherein, the goods manufactured by the assessee are wholly exempt from excise duty leviable thereon with the condition of non-availment of CENVAT Credit.
The assessee appealed against the issue of whether the assessee was required to reverse CENVAT credit on their exempt turnover under rule 6(3) of the CENVAT credit Rules.
Narender Dave, the counsel for the assessee contended that the manufacturer of goods or the provider of output service, opting not to maintain separate accounts for receipt consumption in the inventory of inputs, as provided in clause (a) of sub-rule (2) of CCR and take credit only on inputs which were defined under rule 6 of the CCR.
B. Sangameshwar Rao, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee was not eligible for reversal of CENVAT credit.
The Bench observed that the proper records have not been maintained about the receipt of inputs and their utilization, sub-rule (3) of CCR gives the option to the Assessee, and thus, Revenue cannot enforce any of the options under sub-rule (3) CCR and the assessee was entitled to reverse the amount of credit as per Rule 6(3) of the CCR i.e., pay an amount equal to the specified percentage (5% or 6%) of the value of exempted goods.
The two-member bench comprising Anil Choudhary (Judicial) and Jyothishi (Technical) held that the assessee was entitled to get the reversal of CENVAT credit which they had already paid.
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