Reversal of CENVAT Credit can be made even at Stage of Appeal: CESTAT set aside order Demanding Differential Excise Duty [Read Order]

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has viewed that reversal of Cenvat Credit can be made even at the stage of appeal and set aside the order demanding differential excise duty.

Acme Ceramics, the appellant was engaged in the manufacture of ceramic glazed tiles falling under chapter 69 of the First Schedule to Central Excise Tariff Act, 1985. They were availing the benefit of partial exemption under notification no. 5/2006-CE dated 01.03.2006.

The benefit of the said notification was available to ceramic tiles manufactured in a factory if not using electricity for firing the kiln subject to fulfilment of condition no. 7 of the said notification which stipulated that no credit of the duty paid on the inputs used in or about the manufacture of ceramic tiles has been taken under Rule 3 or Rule 11 of the Cenvat Credit Rules, 2004.  

The appellant had availed credit of duty paid on ceramic roller treating them as capital goods, it had availed cenvat credit of 50% of the duty on such capital goods in the year of receipt i.e. 2007-08 and balance credit was availed in the subsequent year by the provision of Cenvat credit Rules applicable to capital goods.

On the audit, the officers of central excise found that the appellant had availed cenvat credit of Rs.91,236/- on ceramic roller used for construction of roller kiln in the factory on its own during 2007-08 and 2008-09 which was intended to be used further as capital goods in the manufacture of excisable goods. 

The department alleged that the ceramic roller on which the credit was availed is an input used in the manufacture of capital goods i.e. kiln therefore, the ceramic roller being input and credit on which was availed there is a violation of condition no.7 of the notification No.5/2006-CE dated 01.03.2006.

A show cause notice was issued demanding differential Central excise duty of Rs. 76,76,500/- with interest and proposed to impose an equal amount of penalty on the sole ground that the appellant had by availing cenvat credit on parts of capital goods violated condition no. 7 of the Notification No. 05/2006-CE (Sr. No.13) dated 01.03.2006 as amended. The said show cause notice was confirmed by the Commission.

Shri P.D. Rachchh, counsel appearing on behalf of the appellant submitted that the ceramic roller on which the appellant had availed the cenvat credit was used in the manufacture of the kiln therefore, it is a part of the capital goods which is covered under the definition of capital goods hence, it cannot be said that the appellant has availed the cenvat credit on input.

He further submits that even if it is assumed that the ceramic roller is an input the same was used in the manufacture of the kiln and not used in the manufacture of ceramic tiles. The only input which is used in the manufacture of ceramic tiles, credit cannot be availed therefore, there is no violation of condition no.7 of notification No.5/2006-CE dated 01.03.2006.

It was submitted that the appellant at the time of stay in this appeal deposited Rs. 2 lacs, the total credit availed is Rs. 91,236/- therefore, the amount of Rs.91,236/-  can be adjusted against the availment of cenvat credit thus, the situation will be as if no cenvat credit was availed.He further submitted that the reversal of cenvat credit can be made even at the stage of appeal before this tribunal therefore, as of now the amount of cenvat credit and interest thereon stand paid.

A two-member bench comprising Mr Ramesh Nair (judicial) and Mr C L Mahar (technical) viewed that the reversal of credit and payment of interest thereon can be adjusted from the payment of Rs. 2 lacs already made by the appellant.

Further decided based on the submission of the appellant that they are prepared for payment of cenvat credit along with interest and the same can be adjusted against the amount of cenvat credit and interest thereon.

The CESTAT set aside the impugned order and remanded the matter to the adjudicating authority for passing an afresh order.

To Read the full text of the Order CLICK HERE

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