CENVAT Credit Balance of Excise duty will Lapse only if Stock of Input or Input Contained in Final product is Exempted u/s 5A of Central Excise Act defined u/s 11(3) of CCR: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the CENVAT credit balance of excise duty will lapse only if the stock of input or input contained in the final products is exempted under section 5A of the Central Excise Act,1944. 

Suraj Industries, the appellant assessee appealed against the issue involved in the availment of Notification No. 30/2004 of Central Excise after reversal of CENVAT Credit on input, input in the process, and input contained in the final product, whether the balance CENVAT Credit shall lapse in terms of Rule 11(3) of CENVAT Credit Rules (CCR), 2004. 

Sachin Chitnis and Kiran Chavan, the counsels for the assessee contended that as per the strict interpretation of Rule 11(3) of CCR after the reversal of credit as required under Rule 11(3)(i) of CCR, the balance credit shall lapse only in a case where the disease avails an exemption that was absolutely in nature under Section 5A of the Excise Act. 

Rajesh Nathan, the counsel for the department relied on the decisions made by the lower authorities and contended that in the present case, the notification 30/2004 CE was not an absolute exemption but bearing a condition. Therefore, the Rule 11(3)(ii) of CCR shall not be applicable and the balance of CENVAT Credit on availment of Notification No. 30/2004-CE shall not lapse. 

The Bench observed that as per clause (ii) of sub-rule (3) of Rule 11 of CCR if an assessee avails the exemption which was an absolute exemption under section 5A of Central Excise Act then in addition to reversal of the credit as provided under clause (i) of rule 11(3)of CCR the remaining balance of credit after reversal shall lapse. Therefore, it was clear that the reversal of credit on the stock of input, input in the process, and input contained in the final product was required to be reversed by an assessee who avails any exemption. However, the provision for lapsing of credit on the remaining balance shall apply only in cases where the exemption notification was absolute. 

The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) held that in the present case, notification No. 30/2004-CE contains a condition namely “provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on input had been taken under the provision of CCR. 

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