CESTAT quashes Reversal of CENVAT Credit of Excise Duty on Manufacture of Cotton Terry Towels on Ground of Non Insertion of Rule 11(3) of CENVAT Credit Rules [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the reversal of CENVAT credit of excise duty on the manufacture of cotton terry towels on the ground of noninsertion of rule 11(3) of the CENVAT Credit Rules,2004. 

Welspun India Limited, the appellant assessee was engaged in the manufacture of Cotton Terry Towels and is availing the facility of CENVAT credit under the CENVAT Credit Rules and the assesses raw material was attracting Additional Duty of Excise (Textile & Textile Articles) in terms of Section 3 of Additional Duties of Excise (Textile & Textile Articles) Act, 1978. 

The assessee appealed against the order passed by the Commissioner for confirming the reversal of wrongly availed CENVAT credit by the assessee. 

S. Suryanarayanan, the counsel for the assessee contended that the CENVAT credit was legally availed as per the Rule prevailing at the time of receipt of the raw material, and thereafter the same had been carried forward. 

Further submitted that at the time of taking credit and even thereafter when the credit was carried forward there was no provision for recovery or reversal of CENVAT credit and the exemption notification issued before this date and CENVAT credit earned much before this date of insertion of Rule 11(3) of the CENVAT credit rules. 

P. Ganesan, the counsel for the department contended that the assessee was liable to reverse the CENVAT credit lying unutilized in terms of the transitional provision of Rule 11(3)(ii) of the CENVAT Credit Rules. 

The Bench observed that At that relevant time, there was no mechanism to recover the unutilized CENVAT credit in case the final product of the assessee was exempted, particularly when credit was taken and the final product was dutiable. 

The two-member bench comprising Ramesh Nair (Judicial) and C.L Mahar (Technical) quashed the reversal of CENVAT credit while allowing the appeal filed by the assessee. 

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