Manufacture of Dutiable 100% Cotton: CESTAT Disallows Pay Back on Credit Balance [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) disallowed pay back on credit balance on the ground of manufacture of dutiable 100% cotton.

Earlier a show cause notice dated 29.08.2013 was issued to the appellant demanding cenvat credit of Rs.35,82,694/- attributable to inputs and input services used in manufacture of exempted product along with interest and penalty. After remand by the Tribunal the Adjudicating Authority confirmed the demand of Rs. 9,48,034 along with interest and equal penalty which the appellant has accepted and proceeding related to the cenvat credit attributable to the exempted goods was concluded.

The counsel for the appellant argued that the balance of credit pertaining to capital goods as on 07.12.2008, and that this demand was raised on the ground that capital goods was used exclusively in manufacture of exempted final product. It was submitted that the capital goods were received by the appellant much before the final product became exempted and during the receipt till the final product became exempted, the capital goods were being used for manufacture of dutiable.

The counsel contended that the allegation in this regard is absolutely without any basis and beyond the fact that the capital goods were used for both dutiable as well as exempted goods and not used exclusively for exempted goods.

A Two Member Bench comprising observed that “We find that the provision for lapsing of balance credit as on the date when the assessee opt for exemption is not applicable when the assessee manufacture and clear dutiable as well as exempted goods. In the present case there is no dispute that the appellant was manufacturing dutiable goods viz. other than 100% cotton as well as exempted final product ( articles of 100% cotton ) hence, the credit balance available as on 07.12.2008 was available for utilization for payment of duty on dutiable products.”

To Read the full text of the Order CLICK HERE

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