Case Law Details
Commissioner Vs Orient Syntex (Prop. APM Industries Ltd.) (CESTAT Delhi)
We find that there is no dispute on the fact that the respondent has opted for exemption Notification No.30/2004-CE, 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.”
As per the above condition, the exemption Notification No. 30/2004-CE is not an absolute exemption. On the plain reading of 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.
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-CE. 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.
FULL TEXT OF THE CESTAT DELHI ORDER
The respondents are engaged in the manufacture of polyester yarn falling under Chapter 55 of the Central Excise Tariff Act, 1985. They have opted for exemption Notification No.30/2004-CE dated 09.07.2004 w.e.f. 1st April, 2016. In compliance to Rule 11 (3) (i) of the Cenvat Credit Rules, 2004, they have reversed the Cenvat Credit amounting to Rs.54,85,417/- attributable to input, input contained in WIP and finished goods in the stock. After reversal of Cenvat Credit, there was some accumulated balance of CENVAT Credit was available. A show cause notice was issued proposing the demand of CENVAT Credit which was lying in balance even after aforesaid reversal on the ground that in terms of Rule 11 (3) (ii) the balance, if any, still remaining after reversal of credit on input, input in process, and contained in final products. The said balance shall also lapse. The adjudicating authority confirmed the demand. Being aggrieved by the Order-in-Original, the appellant filed appeal before the Commissioner (Appeals). Learned Commissioner… relying on various judgments held that the lapsing of balance credit is applicable only in case the exemption Notification is absolute exemption and not conditional. Accordingly, the appeal of the respondent was allowed. Therefore, Revenue filed the present appeal.
2. Learned Authorised Representative on behalf of the Revenue-appellant submits that in terms of Rule 11 (3) (ii), there is a clear provision for lapsing on balance Credit. He took support from this Tribunal judgment in the case of Supertex Industries Ltd. vs. Commissioner of Central Excise and Service Tax, Vapi [2016 (332) ELT 755 Tri.-Ahmd.)]
3. Learned Counsel appearing on behalf of the respondent submits that the lapsing of balance Credit is applicable only in case the exemption Notification is absolute issued under Section 5A of Central Excise Act, 1944. In the present case, they opted for exemption Notification 30/2004-CE, which contained condition of non-availment of CENVAT Credit. Therefore, the exemption Notification No.30/2004-CE is not an absolute Notification. He submits that the issue has been considered in various judgments, which have been followed by the learned Commissioner (Appeals) also. He placed reliance on the following judgments:-
i. Jansons Taxtile Processors v. CCE & ST, Salem, 2018 (7) TMI 850-CESTAT, Chennai.
ii. Patodia Filaments Pvt. Ltd., Shivkaran Choudhary v. CCE & ST, VAPI (Vice – Versa), 2019 (4) TMI 435 – CESTAT, Ahmedabad.
iii. Patodia Filaments Pvt. Ltd. v. CE & ST, Daman, 2019 (8) TMI 201 – CESTAT, Ahmedabad.
iv. Kanchan India Ltd. v. CCE, Udaipur, 2019 (1) TMI 310 – CESTAT- New Delhi.
v. CCE, Udaipur v. Sitaram India Ltd., 2018 (10) TMI 11 – CESTAT – New Delhi.
vi. Wearit Global Ltd. v. CCE, Udaipur, 2018 (8) TMI 1094 – CESTAT-New Delhi.
vii. Mahabir Jute Mills Ltd. v. CCE & ST, Allahabad, Final Order No. 71798 – 71800/ 2018 dated 27.07.2018.
4. Heard both sides and perused the records.
5. We find that there is no dispute on the fact that the respondent has opted for exemption Notification No.30/2004-CE, 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-CE 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–CE dated 09.07.2004 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 subrule (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–CE dated 09.07.2004. 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.20Lacs is dismissed on the ground of Government‘s litigation policy instruction F.No. 390/Misc/116/2017-JC dated 11.07.2018.”
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 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 vs. 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-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 : ―
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 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, AIR 1972 SC 2141] . However, in respect of the sub-rule 3 (i) and subrule 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,
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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-CE. 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.
[Dictated and Pronounced in the open Court]
