Synfab Sales And Industries Ltd. Vs C.C.E & S.T. (CESTAT Ahmedabad)
From the plain reading of the above rule 11(3) (i) (ii) it is clear that in terms of Clause (ii) of Rule 11(3) the balance credit shall lapse only if the assessee availed an exemption which is absolutely and exempted which is other than absolute covered under clause (i) of Rule 11(3). In case of clause (i) of Rule 11(3) no similar condition of lapsing of balance cenvat credit is provided. In the present case undisputedly the appellant have availed the benefit of Notification No 30/2004-CE which is a conditional one and the said condition prescribed is ―provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on inputs has been taken under the provision of the Cenvat Credit Rules, 2002‖.
Since the Notification No. 30/2004-CE dated 09.04.2007 contains the above condition the notification is not absolutely therefore, the situation of the appellant is covered under Rule 11(3)(i) according to which the appellant is required to pay an amount equivalent to Cenvat Credit, if any taken by him in respect of inputs received for used in the manufacture of said final product and is lying in stock or in process or is contained in the final product or lying in stock but if the Notification is absolutely having no condition in terms of Rule 11(3)(ii) the remaining credit shall lapse and shall not be allowed to be utilized. The case of the appellant is covered by rule 11(3) (i) therefore, the remaining credit shall not lapse. One of the contention by the adjudicating authority is that even though the argument of the appellant that the Cenvat credit balance will lapse as per Rule 11(3) only, the product is exempted absolutely is accepted there is no dispute that Notification No. 30/2004-CE has been issued under section 5A of the Central Excise Act, 1944 and the appellants having opted for the same, cannot escape from the obligation relating reversal of balance Cenvat Credit.
In the section 5A in Sub-section (1) exemption is of two category one is exemption which exempt the goods absolutely and other is subject to such condition as specified in the Notification. In terms of Sub-section (1A) which makes clear distinction that in case of exemption granted absolutely the manufacturer of excisable goods shall not have any option except to pay the duty. The only option is to avail the exemption and no duty shall be paid. Therefore there is a clear distinction between an absolute exemption and conditional exemption. Therefore, the contention of the adjudicating authority that since the exemption notification was issued under section 5A the appellant is otherwise required to pay balance credit is of no substance and has no basis.
We find that this issue has been considered by the tribunal time and again and after interpreting Rule 11(3) (i) and (ii) came to conclusion that in case of conditional notification the assessee is not required to lapse the remaining credit after reversal on input as such, input in process and input contained in finished goods
It can be seen that on the absolute identical issue involving the exemption notification 30/2004-CE the tribunal in various judgments held that balance credit shall not lapse in terms of Rule 11(3) of Cenvat Credit Rules, 2004 therefore the issue is no longer res-integra.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the appellants are engaged in the manufacture of texturized yarn falling under chapter 54 of the Central Excise Tariff Act, 1985. The appellants vide letter dated 23.03.2007 intimated the department that with effect from 01.04.2007 they would simultaneously availing benefit of Notification No 29/2004-CE dated 09.07.2004 and Notification No 30/2004-CE dated 09.07.2004. Further, the appellants in compliance to provisions of rule 11(3)(i) of the Cenvat Credit Rules, 2004 reversed the Cenvat credit involved in inputs lying in stock, inputs containing WIP and finished goods as on 31.03.2007. After such adjustment the balance amount of credit in the Cenvat Credit account maintained by the appellants in their factory was RS 1,57,14,851/-. The appellants did not take any credit on inputs used in manufacture of finished goods during period 01.04.2007 to August 2011. With effect from 01.09.11 the appellants started availing benefit of Notification No 29/2004 –CE dated 09.07.2004 and Notification No 30/2004-CE dated 09.07.2004. simultaneously. After 01.09.2011 in addition to balance credit of Rs.1,57,14,851/- in the Cenvat Credit Account, the appellants took fresh credit on the inputs used in the manufacture of finished goods cleared availing benefit of Notification No 29/2004-CE dated 09.07.2004. The appellant cleared finished goods as export as well as home consumption at nil rate of duty under Notification No 30/2004- CE. They also cleared the finished goods for export under ARE-1 as well as home consumption on payment of excise duty at concessional rate in terms of Notification No. 29/2004 dated 09.07.2004. The appellant utilized the fresh credit on the input received after September-2011 as well as a portion of balance Cenvat credit for payment of excise duty on the finished goods cleared under notification no. 29/2004-CE dated 09.07.2004. The total amount of credit utilized for excise duty on finished goods Rs. 44,44,791/- included payment of excise duty on finished goods cleared for export during the period from September-2011 to June-2013 amount of Rs. 34,71,098/-.
1.2 In the above factual background a show cause notice dated 22.01.2014 came to be issued proposing recovery of Cenvat credit amounting to Rs. 1,5714,851/- on the ground that same has lapsed as per Rule 11 (3) of the Cenvat Credit Rules, 2004 and demanding of Rs. 44,44,791/- under Rule 14 of the Cenvat credit rules read with Section 11A (4) of Central Excise Act, 1944 alleging that the appellants wrongly utilized lapsed credit for payment of duty.
1.3 The aforesaid show cause notice was adjudicated by the Learned Commissioner of Central Excise vide impugned order dated 21.05.2015 wherein the demands have been confirmed and penalty of equivalent amount has been imposed. The contention of the Learned Commissioner for confirming the demand is that whether a person availing a benefit of conditional exemption notification or an absolute exemption notification in either case is required to pay an amount equivalent to credit attributable to inputs lying in stock, inputs in process and inputs contained in the final product lying on stock and credit remaining in balance shall lapse in terms of Rule 11(3). It was further contended that even if the argument of the appellant that the Cenvat credit balance will lapse as per Rule 11(3) only if the product is exempted absolutely is accepted, there is no dispute that Notification No 30/2004-CE dated 09.07.2004 has been issued under section 5A of the Central Excise Act, 1944 and the appellant’s having opted for the same cannot escape from the obligation relating to reversal of balance Cenvat credit. Being aggrieved by the aforesaid impugned order the appellant filed the present appeal.
2. Shri. Anand Nainawati, Learned Counsel appearing on behalf of the appellant submits that in case the manufacturer manufactures goods which are absolutely or unconditionally exempt, the balance credit after reversing the Cenvat credit lying in balance on inputs, WIP and contained in the final product will lapse. This can be differentiated as Rule 11(3)(i) applies when exemption is optional and conditional and Rule 11(3) is applicable when exemption is unconditional/ mandatory. The appellant has availed benefit of Notification No. 30/2004-CE as amended which is conditional notification i.e. exemption is available provided Cenvat credit on inputs has not been taken, to which the provisions of Rule 11(3) (i) of the credit will apply and Rule 11(3)(ii) will not apply. He submits that issue is no longer res-Integra and settled by plethora of judicial decisions. This very same issue has been considered by the Hon’ble Tribunal in the following cases:-
