The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) granted exemption from tax as the excess CENVAT credit was reversed before the show cause notice was issued to the appellant.
UMC Engineering Pvt Ltd (appellant) manufactures Tripper/Dumper bodies and other products like Bins, Containers, etc. The appellant availed the benefit of exemption from tax and cleared the goods without payment of excise duty.
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On scrutiny, it was found that the appellant availed of Small Scale Industries ( SSI ) benefit in respect of finished goods other than the Tripper/ Dumper. The appellant also availed of CENVAT credit on goods like Hydraulic Cylinders, steel Hydraulic valves, etc., which were used for the manufacture of Trippers/Dumpers, for which they were not entitled to avail the benefit.
The department issued a show cause notice stating that the appellant did not fulfill the conditions to avail of exemption under notifications and also to deny SSI benefits. On adjudication, the department denied the exemption of notification and also the benefit of SSI. Aggrieved by the order of the department, an appeal was filed by the appellant before CESTAT.
The counsel for the appellant submitted that the wrong CENVAT credit of Rs. 29 lacs availed to the goods cleared without payment of duty has been reversed by the appellant. The appellant argued that the department failed to consider the reversal of the CENVAT credit.
On the other hand, the counsel for the department relied on the order of the lower authorities and sought to dismiss the appeal.
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The two-member bench comprising Ashok Jindal ( Judicial Member ) and Rajeev Tandon ( Technical Member ) observed that the benefit of exemption can be availed if the CENVAT credit is not taken by the appellant. The tribunal also observed that if the CENVAT credit is reversed then the necessary conditions are fulfilled for availing benefit.
The tribunal also observed that there was no contradicting contention by the revenue that the credit was not reversed. Therefore, the tribunal acknowledged the claim of the appellant that the CENVAT credit of Rs. 29 lacs had been reversed before the issuance of show cause notice.
The tribunal held that the CENVAT credit has been reversed, so conditions for availing exemption are fulfilled. Therefore the tribunal granted the benefit of exemption to the appellant.
The appeal of the appellant was allowed.
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