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2015 (9) TMI 925 - CESTAT CHENNAI

2015 (9) TMI 925 - CESTAT CHENNAI - 2016 (333) E.L.T. 315 (Tri. - Chennai) - Reversal of Cenvat Credit - Final product become exempt subsequently - inputs lying in stock when the Retail Computer System became exempted by Notfn No.23/2004 dt. 9.7.2004 - Held that:- During the relevant period there is no specific provision in CCR for recovery of cenvat credit on the inputs lying in stock when the final product became exempted fully. Only from 1.3.2007 a specific sub-rule (3) of Rule 11 of CCR was .....

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E COURT]. I am fully aware of the fact that this Tribunal Bench also upheld the reversal of credit in the case of CCE Vs M/s.Annapoorna Re-rolling Mills (P) Ltd. (2011 (8) TMI 1093 - CESTAT CHENNAI) - The ratio of the High Court of Madras order [2014 (12) TMI 905 - MADRAS HIGH COURT] is squarely applicable to the present case as the appellant availed the credit on inputs when the final product was dutiable and there was no one to one correlation and the final product was exempted vide Notfn 23/2 .....

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ocate and Mr. Sai Prasanth, Adv. For the Respondent : Ms Indira Sisupal, AC (AR) ORDER The present appeal is against the Order-in-Appeal dt. 6.12.2005. 2. The brief facts of the case are that appellants are manufacturers of Retail Computer Systems, DOT Matrix Printers falling under Chapter Heading 84 & 85 and registered with Central Excise and discharging appropriate Central Excise duty and also availing cenvat credit on the inputs. The appellants had taken credit on inputs used in the manuf .....

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notice dt. 28.2.2055 was issued to the appellant seeking to reverse ₹ 24,34,299/- availed on the said inputs with interest thereon and penalty under Rule 25 of CER 2002. The adjudicating authority in his OIO No.12/2005 dt. 26.5.2005 ordered reversal of credit of ₹ 24,34,299/- availed on the said inputs lying in stock on the date when computers became exempted. The appellate authority also confirmed the demand and waived the penalty of ₹ 10,000/-. 3. Heard both sides. 4. Ld. ad .....

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ct became exempted subsequently. Sub rule (3) of Rule 11 of CCR was inserted only w.e.f. 1.3.2007 where specific provisions was made in the Rules where the manufacturers are required to pay an amount equivalent to the cenvat credit taken in respect of inputs received for use in the manufacture of the final product which is lying in stock, if the final products are exempted absolutely. This amendment cannot be applied retrospectively to their case as the period was prior to date of exemption. He .....

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ELT A212 (SC) 6. CCE Chandigarh Vs Kashmir Conductors 1997 (96) ELT 257 (T) 7. Madura Coats Vs CCE 1996 (82) ELT 512 (T) 4.1 He further placed reliance on the Hon'ble Supreme Court judgment in the case of Dai Ichi Karkaria - 1999 (112) ELT 353 (SC) wherein the Apex Court while dealing with the Central Excise Rules, 1944 held that there is no provision for reversal of credit except where credit is taken illegally or irregularly. 4.2. He submits that case law relied upon by Commissioner (Appe .....

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l be used in the manufacture of final product over period of time whereas the input credit thereon can be utilized upfront in its entirety. Under these circumstances, any denial of credit on the input stock being held or work-in-progress or the finished goods lying in stock is against this principle and is thus not maintainable. In view of above, he prayed for setting the order and allowing the appeal with consequential relief. 5. On the other hand, Ld. AR reiterates the findings in the impugned .....

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ions of both sides. The short issue in the present case relates to whether the disallowance of cenvat credit taken on the inputs lying in stock when the Retail Computer System became exempted by Notfn No.23/2004 dt. 9.7.2004 is correct or otherwise. 7.There is no dispute on the fact that appellants are engaged in manufacture of Retail Computer System falling under Chapter heading 8471 of Central Excise Tariff Act and discharging appropriate excise duty regularly and availing cenvat credit on the .....

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supra). 8.As rightly contended by the appellant, during the relevant period there is no specific provision in CCR for recovery of cenvat credit on the inputs lying in stock when the final product became exempted fully. Only from 1.3.2007 a specific sub-rule (3) of Rule 11 of CCR was inserted making specific provision where a manufacture is required to pay amount equal to the cenvat credit taken on inputs lying in stock if the final product became fully exempted. The Revenue relied on Tribunal .....

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(supra) on identical issue examined the case in detail and distinguished the decisions of both M/s.Albert David Ltd. and M/s.Super Cassettes Industries Ltd. (supra) and held in favour of the appellant. The relevant paragraphs of High Court order is reproduced as under :- "14. In the instant case, assuming for the moment that the credit is available, it can be used for payment of duty on any other excisable articles and not exempted goods. In such view of the matter, we are not agreeable wit .....

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Court. 15. At this juncture, the Tribunal in Ashok Iron and Steel Fabricators case, referred supra as well as the decision of the Bangalore Bench of the Tribunal in the assessee's own case have emphasised over and over again on para (17) of the decision of in Dai Ichi Karkaria Ltd. Case, referred supra, which has very clearly set out the position as to how the credit taken on inputs should be utilized. To sum up, paragragh (17) of the Dai Ichi Karkaria Ltd. case, referred supra, which answe .....

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versal of the credit by the Excise Authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that .....

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plea stands answered. If credit can be taken against excise duty on a final product manufactured on the very day, it makes it abundantly clear that there need not be co-relation between the input and the goods cleared and as a result, validly taken credit need not be reversed. The Central Excise Rules would come into play in the following manner, that is to say, on the date when the final goods become exempt from payment of duty, for the inputs received on and after the said date, no credit can .....

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he Supreme Court, is the correct position. The Tribunal in this case erred in distinguishing the decision of the Bangalore Bench Tribunal placing reliance on Albert David Ltd. case, referred supra. In any event, Ashok Iron and Steel Fabricators case, referred supra, is a Larger Bench decision and the same has been upheld by the Supreme Court and that would be binding on the Tribunal, rather than the Two-Member Bench decision in Albert David Ltd. Case, referred supra. For the foregoing reasons, w .....

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