2017 (5) TMI 749 - AT - Central Excise

Value based exemption - reversal of CENVAT credit - Rule 57AG(2), Rule 9(2) and Rule 11(2) - Held that - in relation to the payment provided under these rules, there was no machinery provision for recovery of the said amount even subsequently also unlike rule 57CC no retrospective provision was brought in the statute - ld. Commissioner has made a clear distinction that wherein the government intend to even bring a machinery provision from retrospective effect it was done so in case of Section 11D and Rule 57CC. However, in the case of Rule 57AG(2), Rule 9(2) and Rule 11(2), no similar machinery provision was brought. Therefore, the finding of the Commissioner (Appeals) is absolutely correct - credit remains allowed - appeal dismissed - decided against revenue.

Summary

Issues:
1. Whether the respondent is liable to reverse cenvat credit on inputs and finished goods under Rule 57AG, Rule 9(2), and Rule 11(2) when opting for exemption.
2. Whether the lack of machinery provision for recovery of cenvat credit reversals affects the jurisdiction of the department to demand the amount.

Issue 1: Liability to Reverse Cenvat Credit:
The respondent availed SSI exemption under notifications dated 01.03.2000 and 01.03.2003, not paying excise duty until reaching specified clearances. Rule 57AG and Rule 9(2) mandate reversal of cenvat credit on inputs and finished goods when opting for exemption. The show-cause notice demanded the credit attributed to stock upon exemption. The adjudicating authority upheld the demand, but the Commissioner (Appeals) dropped it, leading to the revenue's appeal.

Issue 2: Lack of Machinery Provision for Recovery:
The revenue argued that reversal of cenvat credit under the mentioned rules is mandatory, citing legal precedents. The respondent contended that while rules mandate reversal, there is no machinery provision for recovery, challenging the jurisdiction of the show-cause notice and adjudication order. Referring to the case of Pushpaman Forgings, the respondent highlighted the absence of machinery provision for recovery, unlike in the case of Rule 57CC. The Commissioner (Appeals) distinguished between rules with and without machinery provisions for recovery, leading to the dismissal of the revenue's appeal.

In the absence of a retrospective machinery provision for recovery under Rule 57AG(2), Rule 9(2), and Rule 11(2), the Commissioner's decision aligns with the prevailing legal framework. The judgment emphasizes the distinction between rules with and without recovery provisions, supporting the respondent's position. The lack of a machinery provision for recovery in the relevant rules justifies the dismissal of the revenue's appeal, upholding the impugned order.