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M/s Kitex Ltd Versus Commissioner of Central Excise, Cochin

2016 (3) TMI 897 - CESTAT BANGALORE

Refund claim - reversal of cenvat credit - amount paid by the appellants under misunderstanding of the law - Demand Cenvat credit as final products were exempted - Held that:- There is no provision in the modvat rules which provides for a reversal of the credit by the Excise authorities where it has been illegally and irregularly taken, in which event it stands cancelled or if utilised, has to be paid for. Once the input credit is legally taken and utilized on the dutiable final product, it need .....

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erefore the authorities taking advantage of the notification exempting the final product cannot claim reversal of Cenvat credit either in respect of final product which have come into existence on the date of the notification or on the inputs stored in the godown or the work in progress and finished products. See Tafe Ltd. (Tractor Division) [ 2011 (3) TMI 67 - KARNATAKA HIGH COURT ] upheld by SC [ 2011 (9) TMI 952 - SUPREME COURT ] - Decided in favour of assessee - E/249/2007-DB - Final Order N .....

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ere utilizing the same towards payment of duty on final product at the time of clearances from the factory. The final product namely cotton fabric is exempted from payment of duty by Notification No. 30/2004-CE dated 9.7.2004. The demand of duty is on stock of inputs as such, in semi finished and finished products as on 9.7.2004, the Revenue sought to demand Cenvat credit relating to such inputs on the ground that the final products were exempted. The appellants have utilized the entire credit i .....

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issue and the amount has to be reversed as per the provisions of the Cenvat Credit Rules, 2002. The adjudicating authority as well as the first appellate authority after following the due process of law rejected the contentions and denied the refund to the appellants. 3. The learned counsel submits that the issue involved in this case is settled by the Hon ble High Court of Karnataka in the case of Commissioner of Central Excise, Bangalore-II Vs. TAFE Ltd. (Tractors Division) reported in 2011 ( .....

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ger Bench. It is the further submission that Notification does not provide for reversal of credit on the inputs lying in stock, work in progress (WIP) and contained in the finished goods; there is no machinery provisions to recover the credit availed validly/correctly as has been settled by the Supreme Court in the case of Commissioner of Central Excise Vs. Dai Ichi Karkaria Ltd. [1999 (112) E.L.T. 353]. He also took us through the various provisions of the Modvat / Cenvat Credit Rules. 4. The l .....

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hich was in respect of the demand of inputs lying in stock unutilized when the final products are exempted from payment of duty. It is the submission that the said judgment of the Tribunal was upheld by the apex court as reported in 2003 (157) E.L.T. A81 (S.C.). He submits that the lower authorities were correct in rejecting the refund claim. 5. In rejoinder, the learned counsel submits that the issue involved in this case is not regarding the demand of Cenvat credit on the inputs lying in stock .....

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de by both sides and perused the records. 7. The issue involved in this case is regarding refund of the amount paid by the appellants under misunderstanding of the law. The appellant had utilized the Cenvat credit paid on the inputs which were used for the manufacture of finished goods. The appellant had stock of inputs in WIP as well as in finished goods when the Notification No. 30/2004-CE was brought into statute which was availed by them. The said notification only bars the assessee from ava .....

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eds to be reversed when final products are exempted from payment of duty. Their Lordship while deciding the issue held as under : 6. Dealing with Cenvat credit and reversal of said credit, the Apex Court in the case of Collector of Central Excise, Pune v. Dai Ichi Karkaria Ltd. reported in 1999 (112) E.L.T. 353 (S.C.), at paragraph 17 and 18 interpreting Rule 57A and 57J of the Central Excise Rules 1944, has held as under : 17. It is clear from these Rules, as we read them, that a manufacturer o .....

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tands 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 no to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not as if credit can be taken only .....

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