Balance Credit not lapses in terms of Cenvat Credit Rules despite availment of benefit of Exemption Notification: CESTAT [Read Order]

The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the balance credit does not lapses in terms of Cenvat Credit Rules despite availment of benefit of Exemption Notification.

The appellants are engaged in the manufacture of texturized yarn falling under chapter 54 of the Central Excise Tariff Act, 1985. The appellants vide letter dated 23.03.2007 intimated the department that with effect from 01.04.2007 they would simultaneously availing benefit of Notification No 29/2004-CE dated 09.07.2004 and Notification No 30/2004-CE dated 09.07.2004. 

Further, the appellants in compliance to provisions of rule 11(3)(i) of the Cenvat Credit Rules, 2004 reversed the Cenvat credit involved in inputs lying in stock, inputs containing WIP and finished goods as on 31.03.2007. 

After 01.09.2011 in addition to balance credit of Rs.1,57,14,851/- in the Cenvat Credit Account, the appellants took fresh credit on the inputs used in the manufacture of finished goods cleared availing benefit of Notification No 29/2004-CE dated 09.07.2004. The appellant cleared finished goods as export as well as home consumption at nil rate of duty under Notification No 30/2004- CE. They also cleared the finished goods for export under ARE-1 as well as home consumption on payment of excise duty at concessional rate in terms of Notification No. 29/2004 dated 09.07.2004. The appellant utilized the fresh credit on the input received after September-2011 as well as a portion of balance Cenvat credit for payment of excise duty on the finished goods cleared under notification no. 29/2004-CE dated 09.07.2004. The total amount of credit utilized for excise duty on finished goods Rs. 44,44,791/- included payment of excise duty on finished goods cleared for export during the period from September-2011 to June-2013 amount of Rs. 34,71,098/-.

The coram of Judicial Member, Ramesh Nair and Accountant Member, Raju held section 5A in Sub-section (1) exemption is of two category one is exemption which exempt the goods absolutely and other is subject to such condition as specified in the Notification. In terms of Sub-section (1A) which makes clear distinction that in case of exemption granted absolutely the manufacturer of excisable goods shall not have any option except to pay the duty. The only option is to avail the exemption and no duty shall be paid. Therefore there is a clear distinction between an absolute exemption and conditional exemption. Therefore, the contention of the adjudicating authority that since the exemption notification was issued under section 5A the appellant is otherwise required to pay balance credit is of no substance and has no basis. 

“We find 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,” the Tribunal said.

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.