2010 (4) TMI 390 - CESTAT, NEW DELHI

Cenvat credit- Inputs- Area based exemption- The appellants are engaged in manufacture of medicament classifiable under Chapter 29 and 30 of the First Schedule of the Central Excise Tariff Act, 1985, having their unit located in the state of Himachal Pradesh. The appellants undertook expansion programme at their factory in order to avail benefit of the exemption of duty liability on the finished goods under Notification No. 50/2003-C.E., dated 10-6-2003. 3. according to the department, as per the Cenvat Credit Rules, the credit in respect of the duty paid on the inputs is admissible provided it is availed and utilized in or in relation to the manufacture of final goods which are not exempt from payment of duty. Therefore, a show cause notice dated 21-11-2005 came to be issued to the appellants in relation to such stock of inputs available with them on which cenvat credit of Rs. 7,69,52,504/- was sought to be wrongly availed. Held that-credit utilization gets completed on use of credit for payment of duty on final product and use of credit availed goods. Availability of rebate on inputs used in export goods by unit availing area based exemption not a reason to avail credit contrary to provision. Credit can not be said as non-reversible when final product exempted. Lapsing of credit on inputs lying in stock on day of opting for exemption not restricted to situations mentioned in Rule 6(6) of Cenvat Credit Rules, 2004 but Rule 3 not considered in the impugned order. Matter remanded to adjudication authority for fresh decision based on observations in present order.