TMI Blog2024 (1) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... he exempted and dutiable final product. However, in the adjudication order the demand of Rs, 1,20,80,589/- was confirmed on the ground that the said amount was lying in the balance as on 07.12.2008 when the appellant have opted for the exemption and according to Rule 11 (3) of Cenvat Credit Rules, 2004, as the said amount has lapsed. Thus the adjudication order has clearly travelled beyond the scope of show cause notice. It is a settled law in various judgments that when with regard to any charge/allegation the noticee is not put to notice that issue cannot be decided in the adjudication order - it is a settled law that then adjudication order cannot travel beyond the scope of show cause notice, therefore, the demand is not sustainable on the ground that the adjudication order is beyond the scope of show cause notice. Whether the demand of 10% under Rule 6 (3) of Cenvat Credit Rules in the fact that the entire credit attributed to the common input services used in the exempted goods has been reversed, is correct or otherwise? - HELD THAT:- The demand of 10% of value of exempted goods wherein the common cenvatable input services were used in the exempted as well as dutiable goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand on this count is also not sustainable. The demands proposed in the show cause notice is not sustainable on multiple counts - the impugned order is set aside - Appeal allowed. - HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR And HON'BLE MEMBER (TECHNICAL), MR. RAJU Shri Prakash Shah, Shri Mihir Mehta Shri, Mohit Rawal, Advocate for the Appellant Shri Ashok Thanvi, Superintendent (AR) for the Respondent ORDER RAMESH NAIR The brief facts of the case are that on the basis of the investigation and recording of the statements of the employees of the appellant, a show cause notice dated 19.12.2013 was issued to the Appellant inter-alia demanding an amount of Rs. 1,40,23,501 being 10% of the clearance value of exempted product under Rule 6 (3) of CCR and Rs. 40,66,510/- pertaining to credit availed on capital goods allegedly used exclusively in manufacture of exempted product and lying in balance as on 07.12.2008 along with interest and penalties. The said notice also proposed to impose personal penalty on other two appellants under Rule 26 of Central Excise Rules,2002. 1.2 The Adjudicating Authority vide order-in-original dated 24.06.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... became exempted, the capital goods were being used for manufacture of dutiable goods. Therefore, the allegation in this regard is absolutely without any basis and beyond the fact that the capital goods were used for both dutiable as well as exempted goods and not used exclusively for exempted goods. 2.2 Without prejudice, he further submits that even though the order is for lapsing of credit, but it is also not tenable for the reason that as per Rule 11 (3) of Cenvat Credit Rules, after reversal of the credit on input, input in process or input contained in the final product whatever the balance remains, the same shall lapse only when the assessee avail unconditional notification, whereas in the present case exemption is based on the condition, therefore, lapsing provision shall not apply on the fact of the present case. 2.3 He also submits that even though so called exempted goods have been exported partly and to that extent the cenvat credit cannot be denied. He further submits that as regard the main allegation in the show cause notice that since the appellant had availed the cenvat credit on the common input service attributed to the exempted goods, the same will not sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the exempted goods has been reversed, is correct or otherwise. (iii) Whether the demand of cenvat credit in respect of balance credit lying as on 07.12.2008 under Rule 11(3) of Cenvat Credit Rules, 2004 being lapsed is recoverable or otherwise. (iv) Whether the appellant is liable to reverse the cenvat credit on capital goods when the final product manufactured by use of such capital goods became exempted subsequently. 4.1 As regard the first issue, we find that it is an admitted fact that the show cause notice has demanded 10% under Rule 6(3) of Cenvat Credit Rules on the ground that appellant has availed cenvat credit on common input service which were used in the exempted and dutiable final product. However, in the adjudication order the demand of Rs, 1,20,80,589/- was confirmed on the ground that the said amount was lying in the balance as on 07.12.2008 when the appellant have opted for the exemption and according to Rule 11 (3) of Cenvat Credit Rules, 2004, as the said amount has lapsed. Thus the adjudication order has clearly travelled beyond the scope of show cause notice. It is a settled law in various judgments that when with regard to any charge/allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provision for lapsing of balance credit as on the date when the assessee opt for exemption is not applicable when the assessee manufacture and clear dutiable as well as exempted goods. In the present case there is no dispute that the appellant was manufacturing dutiable goods viz. other than 100% cotton as well as exempted final product (articles of 100% cotton) hence, the credit balance available as on 07.12.2008 was available for utilization for payment of duty on dutiable products. This issue is settled in the following judgments: - Shri Baba Exports vs. CCE, Meerut-II 2015 (318) ELT 328 (Tri.Del):- 7.1 From a perusal of this sub-rule, it is clear that this sub-rule would be applicable if the some Cenvat credit availed inputs are being used for manufacture of a final product and that final product has become fully exempt from duty. In such a situation, the assessee would be liable to pay an amount equal to the Cenvat credit involved in respect of the inputs lying in stock or in process, or contained in the final products lying in stock on the date of exemption, and after deducting this amount from the Cenvat credit balance, if any, as on the date of exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) the said final product has been exempted absolutely under Section 5A of the Act, and after deducting the said amount from the balance of Cenvat credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of Service Tax on any output service, whether provided in India or exported. 6.3 It can be seen from bare perusal of the said sub-rule the same will apply only in a situation where final products are exempted and lying in stock. In our considered view the above sub-rule may not be applicable in the facts of this case which is not disputed that there is a discharge of Central Excise duty liability on the other finished products manufactured and cleared like aggregates, components parts of tractors. The above said view is fortified by the judgment of the Tribunal in the case of Shree Baba (supra) wherein after extracting sub-rule 3 of Rule 11 of the Cenvat Credit Rules, the Bench recorded as under :- 7.1 From a perusal of this sub-rule, it is clear that this sub-rule would be applicable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay back credit balance lying as on 07.12.2008. Hence, the demand on this count is also not sustainable. 4.6 As regard fourth issue, we find that as per the admitted fact, before the final product became exempted, on the same capital goods the same exempted product was earlier manufactured when it was dutiable therefore, the capital goods were not used by the appellant exclusively for manufacture of exempted final product. The appellant cleared the goods under Notification No. 29/2004 before it got exempted and it was subject to duty at the rate of 4%. Therefore, the capital goods were not used exclusively for the manufacture of exempted of final product. Hence, the allegation of the show cause notice that the capital goods were used exclusively for manufacture of exempted final product is not correct. Therefore, the demand on this count is also not sustainable. This issue has been considered by this Tribunal in the following judgments: - In the case of Bannari Amman Spinning Mills Ltd- 2022 (2) TMI 57- CESTAT Chennai Has passed following order: 20.1 Another allegation raised by the department is that capital goods have been used exclusively for the manufacture of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we see that issues that pose for our consideration in these appeals have been decided and settled by decisions discussed above. Though it is alleged in the show cause notice that the appellants have availed credit on input services, the Ld. Counsel for appellants has asserted that the issue is with regard to disallowance of credit on capital goods only. 22. After appreciation of facts and evidence placed before us and applying the decisions cited supra, we are of the considered opinion that the disallowance of credit cannot be justified. Impugned orders are set aside. Appeals are allowed with consequential relief. In the case of Nahar Industrial Enterprise Ltd 2021 (8) TMI 799- CESTAT Chandigarh has passed the following order:- 18. Further, we take a note of the fact that on similar facts for the subsequent period, the cenvat credit on capital goods was allowed by the adjudicating authority to the appellant in their own case. Therefore, the revenue cannot take divergent view on the same issue which has already been settled by this Tribunal. As Rule 6 (4) of CCR, 2004 deals with the situation that if the capital goods have been used for manufacture of exclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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