Zenith Fibers Ltd Vs C.C.E. & S.T.-Vadodara (CESTAT Ahmedabad)
CESTAT held that by reversing 5% of the value of exempted goods in terms of Rule 6(3)(i) appellant fulfilled the condition of exemption Notification No. 30/2004-CE & so legally entitle for exemption Notification No. 30/2004-CE, and the demand is not sustainable.
Introduction: This article examines the case of Zenith Fibers Ltd vs C.C.E. & S.T.-Vadodara-i, where the appellant’s compliance with exemption conditions through the reversal of 5% of the value of exempted goods under Rule 6(3)(i) of the Cenvat Credit Rules 2004 was under scrutiny. The case was heard at the CESTAT Ahmedabad.
Analysis: The case centered around the appellant’s eligibility for exemption under Notification No. 30/2004-CE despite availing Cenvat Credit on common inputs. The appellant had reversed 5% of the goods’ value, adhering to Rule 6(3)(i), as a mechanism of non-availment of Cenvat Credit. The appellant argued that the reversal fulfilled the exemption condition.
The appellant’s contention was that the reversal of 5% effectively nullified the Cenvat Credit, making it as if no credit was availed, thus complying with the exemption condition. This argument was supported by relevant case law such as Spentax Industries Ltd vs. Commissioner of Central Excise & Service Tax and others. The tribunal upheld the argument that such reversal constituted non-availment of Cenvat Credit, rendering the appellant eligible for the exemption.
Conclusion: The CESTAT Ahmedabad ruled in favor of Zenith Fibers Ltd, stating that the reversal of 5% of the value of exempted goods in compliance with Rule 6(3)(i) fulfilled the condition of Notification No. 30/2004-CE. This meant that the appellant was legally entitled to the exemption, and the demand was deemed unsustainable. The case highlights the significance of correctly interpreting and applying rules and notifications to determine eligibility for exemptions in the context of Cenvat Credit.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the case are that the appellant are engaged in the manufacture of Polypropylene Staple Fiber and Polypropylene Spun Yarn falling under Central Excise Tariff Heading No. 5509 4210. They have cleared the said goods during the period of 01.04.2010 to 31.02.2011 by availing exemption Notification No. 30/2004-CE dated 09-07-2004 (Sr. No. 9). The appellant though availed the Cenvat Credit on the common inputs however at the time of clearance of the goods they have reversed 5% of the value of the goods in terms of Rule 6(3)(i) of Cenvat Credit Rules 2004. The case of the department is that since the appellant had availed Cenvat Credit even though they reversed 5% they have violated the condition of Notification No. 30/04-CE which prescribes for availing the said exemption no Cenvat Credit should be availed on inputs. Accordingly, by denying the exemption Notification No. 30/04-CE, the demand was confirmed for the period prior to the 01.04.2011.
2. Shri Abhay Desai, Learned Counsel, appearing on behalf of the appellant submits that as per the condition of Notification No. 30/2004-CE the appellant should not have availed the Cenvat Credit in terms of Cenvat Credit Rules, 2004. He submits that the reversal of 5% in terms of 6(3)(i) of Cenvat Credit Rules, 2004 is also a mechanism of non-availment of Cenvat Credit therefore, by reversing of 5% the situation is as if no Cenvat Credit was availed. Therefore, the condition of the notification stands complied with. Accordingly, demand is not sustainable.
2.1 He submits that on the identical facts this Tribunal has considered this issue in the following decisions:
