Case Law Details
Marudhar Spinning Mills Pvt Ltd Vs C.C.E (CESTAT Ahmedabad)
Short issue required to be decided in this matter is as to whether such reversal of credit, either by payment of 6% in terms of Rule 6 or by debiting the same from the Cenvat credit account, would result to satisfying the condition of notification No. 30/2004-CE in question. The condition of the notification is that no credit should have been availed in respect of inputs used in the manufacture of such goods. We find that the issue is no more res integra and stands settled by Hon’ble Supreme Court in the case of Chandrapur Magnet Wires Ltd. v. C.C.E. – 1996 (81) E.L.T. 3 (S.C.). It stands held that when credit so availed is subsequently reversed, the situation would be as if no credit was ever availed.
The ratio of law declared by the varipus decisions to the effect that the credit initially taken if reversed subsequently is required to be considered as if no credit was ever taken and amounts to satisfying the condition of notification which are to the effect that no credit should be availed on inputs. We also note that Hon’ble Gujarat High Court’s decision in the case CCE v. Ashima Dyecot Ltd. – 2008 (232) E.L.T. 580 (Guj.) = 2008 (12) S.T.R. 701 (Guj.) where the provisions of explanation to Rule 3, which also stands relied upon by the adjudicating authority in the present case, were taken note of, it was held that reversal would amount no credit situation. Inasmuch as the appellant has reversed the entire credit, either by way of payment of 8% or by debiting the same in Cenvat credit account, we find that the condition of notification is satisfied
We further noticed that this issue had come up for consideration before the Allahabad High Court in the case of Hello Minerals Water (P) Ltd. v. Union of India, reported in 2004 (174) E.L.T. 422 (All.), wherein it is held that reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence, the benefit has to be given of the notification granting exemption/rate of duty on the final products since the reversal of credit on the input was done at the Tribunal’s stage. While arriving at this conclusion, the Allahabad High Court has referred to various judgments under which such reversal was made subsequently and still the benefit was given to the assessee.
In view of above analysis and findings, we are of the considered view that the impugned order is unsustainable, and accordingly, we set aside the same. The assessee’s appeal is allowed and department’s appeal is dismissed.
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