Case Law Details

Case Name : Synfab Sales And Industries Ltd. Vs C.C.E & S.T.-Silvasa (CESTAT Ahmedabad)
Appeal Number : Excise Appeal No. 11423 of 2015
Date of Judgement/Order : 06/01/2022
Related Assessment Year :

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:-

  • CCE Vs. Orient Syntex- 2020 (40) GSTL 56 (T)
  • Jansons Textile Processors v. Commissioner -2018 (7) TMI 850-(T)
  • Kanchan India Ltd. v. Commissioner 2019 (1) TMI 310-(T)
  • Patodia Filaments Pvt. Ltd. v. Commissioner-2019 (4) TMI 435-(T)
  • Patodia Filaments Pvt. Ltd. v. Commissioner-2019 (8) TMI 201-(T)

2.1 He further submits that the Learned Commissioner in impugned order is incorrect in upholding the recovery of the credit amount Rs. 44,44,791/-utilized for payment of duty on the finished goods cleared during the period from September-2011 to June-2013 hence, the impugned order is liable to be set aside. He further submits that there was no suppression of facts by the appellant and hence the demand is barred by limitation provided under section 11A of the Central Excise Act. The department was aware of the finished goods manufactured and the exemption notifications availed in respect of the same during the period in question. Further, the department was aware of the fact that the appellant’s were not taking Cenvat credit on the inputs used in manufacture of the finished goods cleared during the period from 01.04.2007 to August-2011 and that the credit balance as on 31.03.2007 after adjustment of the credit involved in the inputs lying in stocks, inputs contained in WIP and finished goods was being shown in the Cenvat credit accounts. There is no requirement of giving any other details other than the details furnished by the appellant’s in the returns filed by them.

2.2 The appellant’s were also filing monthly returns along with Cenvat details with the departmental authorities from time to time in which the fact that they had been availing the nil rate of duty on finished goods under Notification no. 30/2004-CE from 01.04.2007 to August-2001 was duly indicated. These returns clearly show that all points of time the departmental authorities were aware of the full facts and especially the facts that the credit balance as on 31.03.2007 was carried forward. Therefore there is no suppression of facts and demand is also hit by limitation also.

3. Shri. Vinod Lukose, Learned Superintendent (AR) appearing on behalf of the revenue reiterates the finding of the impugned order.

4. We have carefully considered the submissions made by both the sides and perused the records. We find that the limited issue to be decided by us is that when the appellant has availed the exemption Notification No. 30/2004-CE dated 09.07.2004 which prescribed the nil rate of duty but bearing condition that no Cenvat credit should be availed whether Cenvat credit lying in balance after reversal on inputs, WIP and inputs contained finished goods, shall lapse in terms of Rule 11(3). For the ease of reference we reproduced Rule 11(3):-

“[(3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if, –

(i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under section 5A of the Act; or

(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.”

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‖.

4.1 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. The relevant section 5A is reproduced below:-

Balance credit not lapses in terms of Rule 11(3) of Cenvat Credit Rules, 2004 despite availment of benefit of Notification No 30-2004-CE

“5A. Power to grant exemption from duty of excise.— (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon:

Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured—

(i) in a [free trade zone [or a special economic zone]] and brought to any other place in India; or (ii) by a hundred per cent export-oriented undertaking and [brought to any other place in India].

Explanation.—In this proviso, [―free trade zone” [,―special economic zone”]] and ―hundred per cent. export-oriented undertaking” shall have the same meanings as in Explanation 2 to sub-section (1) of section 3. [(1A) For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods.]

……………………….

In the aforesaid 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.

4.2 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. The relevant judgments are reproduced below:-

  • CCE Vs. Orient Syntex- 2020 (40) GSTL 56 (T)

5. We find that there is no dispute on the fact that the respondent has opted for exemption Notification No. 30/2004-C.E., which carries the following conditions :-

”Provided that nothing contained in this Notification, which shall apply to the goods in respect of which credit of duty on inputs has been taken under the provisions of Cenvat Credit Rules, 2004.”

6. As per the above condition, the exemption Notification No. 30/2004-C.E. is not an absolute exemption. The provision for lapsing of credit is provided in Rule 11(3).

”(3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the Cenvat credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if, –

(i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under Section 5A of the Act; or

(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.”

7. On the plain reading of the above Rule 11(3)(i) (ii), it is clear that as per sub-clause (2), the credit shall be lapsed only if the exemption under the Notification is absolute that means in case of conditional Notification the provision of lapsing of credit will not apply. This issue has been considered by this Tribunal in various judgments.

7.1 In case of Patodia Filaments Pvt. Ltd. (supra), the Tribunal has observed as under :-

”6. Heard both the sides and perused the records. We find that the notification No. 30/2004-C.E., dated 9-7-2004 is not an absolute notification but a conditional notification issued under Section 5A. The notification has the condition of non-availment of Cenvat credit. The sub-rule (3)(i) and (ii) of Rule 11 of the CCR, 2004 are separate. In the present case the sub-rule 3(i) would thus apply as per which the manufacturer is required to pay an amount equivalent to the Cenvat credit in respect of inputs used in the manufacture of said final product and is lying in stock or in process or is contained in final product lying in stock. In the present case all the conditions enumerated under sub-rule 3(i) has been followed by the Appellant and he is not required to reverse the entire credit lying in balance on the date of opting Notification No. 30/2004-C.E., dated 9-7-2004. Therefore, the balance credit is not liable to be reversed. For the same reason the credit utilised by him for clearance of finished goods or capital goods. We also find that on similar issues in the case of Wearit Global Ltd. – 2018 (8) TMI 1094-CESTAT, Janson Textile Processors – 2018 (7) TMI 850-CESTAT-Chennai and Sitaram India Ltd. – 2018 (10) TMI 11-CESTAT-New Delhi, the credit stands allowed to the manufacturer.

7. We, therefore, allow the appeals filed by both the Appellants with consequential reliefs, if any. Revenue‘s appeal being involved the amount less than Rs. 20 Lacs is dismissed on the ground of Government‘s litigation policy instruction F.No. 390/Misc/116/2017-JC, dated 11-7-­2018.”

7.2 In the case of Kanchan India Ltd. (supra), the Co-ordinate Bench of CESTAT, Delhi has taken the following view :-

6. After going through the impugned order and appeal papers, we are of the considered [view] that similar view has been taken by the various coordinate benches, which is as under :

”3. Ld. Advocate for the appellant while relying upon the decision of Jansons Textile Processors v. Commissioner, Central Excise & ST Salem – 2018 (7) TMI 850 (CESTAT), Chennai has submitted that the present case is squarely covered under the said decision. Actually Rule 11 sub-rule (1) of CCR is applicable to him. It is impressed upon that decision under challenge has wrongly relied upon Rule 11 sub-rule (2) of CCR while denying utilization of the unutilized credit with the appellant. Order is accordingly prayed to be set aside and appeal is prayed to be allowed.

4. Ld. DR while justifying the impugned order has impressed upon findings in para 21.2 thereof. It is impressed upon that the adjudicating authority has clearly explained about the applicability of Rule 11(2) in the present case. Appeal is accordingly prayed to be rejected.

5. After hearing both the parties, we are of the opinion that in the present case the appellant has opted for exemption as per the Notification No. 30/2004-C.E. where the exemption is conditional. As per Rule 11(3)(ii) CCR, Cenvat Credit balance will lapse only if the product is exempted absolutely under Section 5A of Central Excise Act. But since the Notification No. 30/2004-C.E., dated 9-7-2004 is a conditional notification, hence only Rule 11(3)(i) of CCR would apply which does not mandate any such lapsing.

6. We draw our support from the decision of CESTAT Chennai in the case of Janson Textile Processors v. Commissioner of Central Excise & ST, Salem wherein it was held as follows :-

”5.1 The core issue that comes up for decision is whether the transitional provisions contained in sub-rule (3) of Rule 11 will be applicable to both sub-rules 3(i) and 3(ii). For better understanding, the relevant provisions relating to manufacturers are reproduced as under :-

RULE 11. Transitional provision. –

… … …

(3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the Cenvat credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if,

(i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under Section 5A of the Act; or

(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.

5.2 It is pertinent to note that the sub-rule 3(i) and sub-rule 3(ii) are separated by a semicolon (;) followed by the disjunctive, ‘or‘. The use of semicolon (;), the punctuation mark is to separate two closely related independent clauses, ‘or‘ is a particle‘ used to connect words, phrases or classes representing alternatives [J. Jayalalitha v. UOI – (1999) 5 SCC 138]. Only if the phrasing of the legal provision is such that in actuality ‘and‘ is intended, should it be examined whether the alternatives separated by ‘or‘ are not mutually exclusive. The Courts may construe ‘or‘ as ‘and‘, only if they find from the context that the wrong word must have been used. [Ranchhoddas Atmaram v. UOI, AIR 1961 SC 935; Firoj Farukee v. State of West Bengal, AIR 1972 SC 2141] . However, in respect of the sub-rule 3(i) and sub-rule 3(ii) ibid, there should not be any such confusion or doubt, since those two sub-rules are separated not by just a particle ‘or‘ but also by a semicolon (;), thus creating an additional wall for conveying mutual exclusivity between the two sub rules. There is also no basis for suggesting that the use of ‘or‘ between these sub-rules conveys the meaning ‘or both‘. For example, to be able to impose both a fine and a penalty, one would need to add ‘or both‘ to the end of the phrase. That surely is not the case here.

5.3 Viewed in this context, it is but obvious that the legislature intended the said sub-rules 3(i) and 3(ii) to be two distinct and separate alternatives, with distinctively different qualifying factors and conditionalities.

5.4 In sub-rule 3(i), the assessee has an option to avail of a particular notification or otherwise; when such assessee takes such option, he will be required to pay an amount equivalent to Cenvat credit, if any,

…………….

6. In the event, the findings and decision of the lower appellate authority to the contrary in the impugned order is not on sound legal footing. The impugned order then cannot sustain and will require to be set aside, which we hereby do. Appeal is allowed with consequential benefits, if any, as per law.

7. Following these 2 decisions and indulging the facts at length, we are of the considered opinion that the ratio laid down in the judgments are squarely applicable in this case, and therefore, we allow the appeal.”

7. After going through the facts of the case which is similar, to the above we propose to apply the same in case at hand, we allow the appeal.”

8. In view of the above judgments, it is settled that after reversal of credit in respect of input, input in process and input contained in final products whatever balance is left shall lapse only when the Notification is unconditional. As regards, the judgment relied upon by the Learned Authorised Representative, on careful consideration, we find that the issue involved in such case was eligibility of exemption Notification No. 30/2004-C.E. Though some observation was made by the Hon‘ble Bench, however, no final decision was given on the said issue, as the said issue was not the subject matter of the appeal.

9. As regards the judgment in the case of Supertex Industries Ltd. (supra) relied upon by the Learned Authorized Representative, the same is not directly applicable in the facts and circumstances of the present case and the same is distinguished. The impugned order is upheld and the Revenue‘s appeal is dismissed.”

  • Jansons Textile Processors v. Commissioner -2018 (7) TMI 850- (T)

”5.1 The core issue that comes up for decision is whether the transitional provisions contained in sub-rule (3) of Rule 11 will be applicable to both sub-rule 3 (i) and 3 (ii). For better understanding, the relevant provisions relating to manufacturers are reproduced under :

”RULE:-11.Tansitional provision

…. …. …..

(3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the finalproduct lying in stock, if, –

(i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under section 5A of the Act; or

(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.‖

5.2 It is pertinent to note that the sub-rule 3 (i) and sub-rule 3 (ii) are separated by a semicolon ( ; ) followed by the disjunctive ‚or‛. The use of semicolon ( ; ), the punctuation mark is to separate two closely related independent clauses. ‚Or‛ is a ‗particle‘ used to connect words, phrases or classes representing alternatives [ J. Jayalalitha Vs UOI – (1999) 5 SCC 138 ].Only if the phrasing of the legal provision is such that in actuality ‚and‛ is intended, should it be examined whether the alternatives separated by ‚or‛ are not mutually exclusive. The Courts may construe ‚or‛ as ‚and‛, only if they find from the context that the wrong word must have been used. [Ranchhoddas Atmaram v. UOI, AIR 1961 SC 935; Firoj Farukee v. State of West Bengal, AIR1972 SC 2141] . However, in respect of the sub-rule 3 (i) and sub-rule 3 (ii) ibid, there should not be any such confusion or doubt, since those two sub-rules are separated not by just a particle ‚or‛ but also by a semicolon (;), thus creating an additional wall for conveying mutual exclusivity between the two sub rules. There is also no basis for suggesting that the use of ‚or‛ between these sub-rules conveys the meaning ‚or both‛. For example, to be able to impose both a fine and a penalty, one would need to add ‚or both‛ to the end of the phrase. That surely is not the case here.

5.3 Viewed in this context, it is but obvious that the legislature intended the said sub rules 3 (i) and 3 (ii) to be two distinct and separate alternatives, with distinctively different qualifying factors and conditionality.

5.4 In sub rule 3 (i), the assessee has an option to avail of a particular notification or otherwise; when such assessee takes such option, he will be required to pay an amount equivalent to cenvat credit, if any,

.. taken by him in respect of inputs received for use in the manufacture of the final product and is lying in stock

.. or in process

.. or is contained in the final product lying in stock.

There is no other requirement that the assessee falling within the scope of sub-rule 3 (i) will be required further to do. On the other hand, sub-rule (3) (ii) ibid will cover the situation where the said final product has been exempted ‚absolutely‛under Section 5A ibid.

5.5 Sub-rule (3) (i) ibid will apply when the assessee opts for an exemption from the whole of duty of excise leviable under a notification issued under Section 5A of the Central Excise Act, 1944. Sub-rule (3) (ii) ibid will be attracted only to those assessees who are confronted with absolute exemption in respect of final product/s manufactured by them, in which case the entire balance of cenvat credit lying in his account shall lapse and the same shall not be allowed to be utilized for payment of duty for home consumption or for export.

5.6 Hence, in sub rule 3 (i) ibid, the assessee has to ‚opt‛ for the exemption whereas in sub-rule 3 (ii) ibid, there is no such option available to the assessee and the absolute exemption that may have been brought forth under Section 5A ibid would apply unilaterally to the related final product manufactured by the assessee.

5.7 It is important to note that the law makers have not incorporated the requirement of payment of cenvat credit equivalent to credit taken by the assessee in respect of inputs lying in stock or in process in sub rule 3 (ii) ibid. In our view, this is because once the entire cenvat credit account is reduced to naught, there will be no cenvat credit that will be available whatsoever, under sub-rule 3 (ii) ibid, for the assessee to avail.

6. In the event, the findings and decision of the lower appellate authority to the contrary in the impugned order is not on sound legal footing. The impugned order then cannot sustain and will require to be set aside, which we hereby do.Appeal is allowed with consequential benefits, if any, as per law.‖

  • CCE Vs Sitaram India Ltd- 2018(10) TMI 11- CESTAT NEW DELHI

”6. The respondent who was availing the benefit of cenvat credit under Cenvat Credit Rules, 2004, opted for exemption granted by Notification No.30/2004 ibid, w.e.f. 01.04.2013. The dispute has arisen consequent to such a move on the part of the respondent. Rule 11 of Cenvat Credit Rules, 2004 outlines the transitional provisions which are required to be followed by an assessee opting from the route of payment of duty to that of availing exemption. The question for decision is whether the respondent will be covered by the provisions of Rule 11(3)(i) or 11(3)(ii).

7. We find that the identical issue has been considered in detail in the case laws relied by the respondent. In the case of Jansons Textile Processor (supra), the Chennai Bench of the Tribunal has taken the view that in case of conditional exemption such as exemption under Notification No. 30/2004, the assessee will be covered only by Rule 11(3)(i). This decision has been followed in the case of Wearit Global Ltd. (supra) wherein the Tribunal observed as under:

5. Àfter hearing both the parties, we are of the opinion thatinthe present case the appellant has opted for exempt ion as per the Notification No. 30/2004-CE where the exemption is conditional. As per Rule 11(3) (ii) CCR, Cenvat Credit balance will lapse only if the product is exempted absolutely under Section 5A of Central Excise Act.But since the Notification No. 30/2004-CE dated 09.07.2004 is a conditional notification, hence only Rule 11 (3)(i) of CCR would apply which does not mandate any such lapsing‖.

8. By following the settled position of law as above, I find no infirmity in the impugned order passed by the Commissioner (Appeals). The same is sustained and the appeals filed by Revenue are rejected.‖

  • Wearit Global Ltd Vs CCE-2018(8) TMI 1094 CESTAT NEW DELHI

5. After hearing both the parties, we are of the opinion that in the present case the appellant has opted for exemption as per the Notification No. 30/2004-CE where the exemption is conditional. As per Rule 11 (3)(ii) CCR, Cenvat Credit balance will lapse only if the product is exempted absolutely under Section 5A of Central Excise Act. But since the Notification No. 30/2004-CE dated 09.07.2004 is a conditional notification, hence only Rule 11 (3)(i) of CCR would apply which does not mandate any such lapsing.

6. We draw our support from the decision of CESTAT-Chennai in the case of Janson Textile Processors Vs. Commissioner of Central Excise & ST Salem wherein it was held as follows:-

”5.1 The core issue that comes up for decision is whether the transitional provisions contained in sub-rule (3) of Rule 11 will be applicable to both sub-rules 3 (i) and 3 (ii). For better understanding, the relevant provisions relating to manufacturers are reproduced as under:

”RULE11.Transitionalprovision.

….                                                  ….                                             …..

(3) A manufacturer or producer of a final product shall be required to pay an amount equivalent to the CENVAT credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if, (i) he opts for exemption from whole of the duty of excise leviable on the said final product manufactured or produced by him under a notification issued under section 5A of the Act; or

(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.”

5.2 It is pertinent to note that the sub-rule 3 (i) and sub-rule 3 (ii) are separated by a semicolon ( ; ) followed by the disjunctive ‚or‛. The use of semicolon ( ; ), the punctuation mark is to separate two closely related independent clauses. ‚Or‛ is a particle‗ used to connect words, phrases or classes representing alternatives [ J. Jayalalitha Vs UOI – (1999) 5 SCC 138 ]. Only if the phrasing of the legal provision is such that in actuality ‚and‛ is intended, should it be examined whether the alternatives separated by ‚or‛ are not mutually exclusive. The Courts may construe ‚or‛ as ‚and‛, only if they find from the context that the wrong word must have been used.[Ranchhoddas Atmaramv.UOI, AIR 1961 SC 935; Firoj Farukee v. State of West Bengal, AIR 1972 SC 2141] . However, in respect of the sub-rule 3 (i) and sub-rule 3 (ii) ibid, there should not be any such confusion or doubt, since those two sub-rules are separated not by just a particle ‚or‛ but also by a semicolon (;), thus creating an additional wall for conveying mutual exclusivity between the two sub rules. There is also no basis for suggesting that the use of ‚or‛ between these sub-rules conveys the meaning ‚or both‛. For example, to be able to impose both a fine and a penalty, one would need to add ‚or both‛ to the end of the phrase. That surely is not the case here.

5.3 Viewed in this context, it is but obvious that the legislature intended the said sub rules 3 (i) and 3 (ii) to be two distinct and separate alternatives, with distinctively different qualifying factors and conditionalities.

5.4 In sub rule 3 (i), the assessee has an option to avail of a particular notification or otherwise; when such assessee takes such option, he will be required to pay an amount equivalent to cenvat credit, if any,

…………………..

6. In the event, the findings and decision of the lower appellate authority to the contrary in the impugned order is not on sound legal footing. The impugned order then cannot sustain and will require to be set aside, which we hereby do. Appeal is allowed with consequential benefits, if any, as per law.”

7. Following these 2 decisions and indulging the facts at length, we are of the considered opinion that the ratio laid down in the judgments are squarely applicable in this case and therefore, we allow the appeal.”

From the above 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.

5. Accordingly, the impugned order is set aside and appeal is allowed.

(Pronounced in the open court 06.01.2022 )

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