Assessee not required to lapse remaining Credit after Reversal on Input as such in case of Conditional Notification: CESTAT [Read Order]

The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the assessee not required to lapse remaining credit after reversal on input as such in case of conditional notification.

The appellants are engaged in the manufacture of texturized yarn falling under chapter 54 of the Central Excise Tariff Act, 1985. A show cause notice dated 22.01.2014 came to be issued proposing recovery of Cenvat credit amounting to Rs. 1,5714,851/- on the ground that same has lapsed as per Rule 11 (3) of the Cenvat Credit Rules, 2004 and demanding of Rs. 44,44,791/- under Rule 14 of the Cenvat credit rules read with Section 11A (4) of Central Excise Act, 1944 alleging that the appellants wrongly utilized lapsed credit for payment of duty.

Anand Nainawati, Counsel appearing on behalf of the appellant submits that in case the manufacturer manufactures goods which are absolutely or unconditionally exempt, the balance credit after reversing the Cenvat credit lying in balance on inputs, WIP and contained in the final product will lapse. This can be differentiated as Rule 11(3)(i) applies when exemption is optional and conditional and Rule 11(3) is applicable when exemption is unconditional/mandatory. The appellant has availed benefit of Notification No. 30/2004-CE as amended which is conditional notification i.e. exemption is available provided Cenvat credit on inputs has not been taken, to which the provisions of Rule 11(3) (i) of the credit will apply and Rule 11(3)(ii) will not apply.

The coram of Judicial Member, Ramesh Nair and Technical Member, Raju held that this issue has been considered by the tribunal time and again and after interpreting Rule 11(3) (i) and (ii) came to conclusion that in case of conditional notification the assessee is not required to lapse the remaining credit after reversal on input as such, input in process and input contained in finished goods.

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