Sri Shanmugavel Mills (Ltd.) Vs Commissioner of GST and Central Excise (CESTAT Chennai)
Credit Reversal Demand Quashed Because Exported Exempted Goods Remain Eligible for CENVAT Benefit; CENVAT Reversal Cannot Include Yarn Waste Because Waste Is Not a Dutiable Final Product; Demand Fails Because Job-Work Turnover Cannot Be Counted Twice for Credit Reversal; Extended Limitation Invalid Because Dispute Involved Interpretation of Rule 6(3A); Penalty Deleted Because Revenue Failed to Prove Suppression of Facts; CESTAT Cancels Credit Reversal Demand Because Exports, Waste and Job Work Were Incorrectly Included
The appeal before CESTAT Chennai concerned a demand of ₹38.45 lakh towards alleged short reversal of CENVAT credit, along with interest and an equivalent penalty, arising from the Department’s view that the appellant had incorrectly computed reversal of common input service credit under Rule 6(3A) of the CENVAT Credit Rules, 2004. The Department contended that while calculating exempted turnover, the appellant had failed to include (i) exports made under Notification No. 30/2004-CE and the DEPB scheme, (ii) goods cleared for job work, and (iii) yarn waste. Consequently, the Department alleged short reversal of credit attributable to exempted goods and issued a show cause notice seeking recovery of the amount with interest and penalty.
The appellant argued that it had availed CENVAT credit only on input services and not on inputs. It contended that exports made under Notification No. 30/2004-CE could not be treated as exempted turnover for reversal purposes merely because exports were made without execution of a bond or letter of undertaking. According to the appellant, non-execution of a bond was only a procedural lapse, whereas the fact of export was undisputed and all export procedures had been followed under departmental supervision.
