Rajasthan High Court Admits Appeal On Issue Of Reversal Of Credit On Input Lying In Stock When Final Product Is Exemplified

The Rajasthan High Court, Jodhpur, comprising Chief Justice Manindra Mohan Shrivastava and Justice Munnuri Laxman, admitted the appeal filed by the Commissioner, Central Excise and Service Tax, on the issue of reversal of credit on input lying in stock when the final product is exemplified.

The respondent or assessee is in the business of manufacturing cotton fabrics and manmade fabrics falling under chapters 52 and 55, respectively, of the first schedule of the Central Excise Tariff Act of 1985.

As per the provisions of Rule 11(3)(ii) of the Cenvat Credit Rules, 2004, at the time of opting for the exemption, the assessee was required to pay or reverse an amount equivalent to the Cenvat creditof the Cenvat Credit Rules, 2004, at the time of opting for the exemption, the assessee was required to pay or reverse an amount equivalent to the Cenvat credit of the Cenvat Credit Rules, 2004, at the time of opting for the exemption, the assessee was required to pay or reverse an amount equivalent to the Cenvat credit(of the Cenvat Credit Rules, 2004, at the time of opting for the exemption, the assessee was required to pay or reverse an amount equivalent to the Cenvat creditiof the Cenvat Credit Rules, 2004, at the time of opting for the exemption, the assessee was required to pay or reverse an amount equivalent to the Cenvat creditiof the Cenvat Credit Rules, 2004, at the time of opting for the exemption, the assessee was required to pay or reverse an amount equivalent to the Cenvat credit)of the Cenvat Credit Rules, 2004, at the time of opting for the exemption, the assessee was required to pay or reverse an amount equivalent to the Cenvat credit ofpect of the inputs lying in stock or in,ocesprocess,ntained in final the finalct lying in stock)stock),emainthe remainingt had to lapse and cannot be alloweusedayment of duty on the goods cleared for home consumption or export or for payment of service tax on outputthe outputce since the assessee had already availeavailed of thetof the exemptionl of their final products during material time.

The adjudicating authority decided the Show Cause Notice and confirmed the lapse of the balance of Cenvat credit of Rs 17,01,779/- and Rs 3,04,94,919/- in terms of the provisions of Rule 11(3) of the Cenvat Credit Rules, 2004 and the penalty under Rule 15(1) of the Cenvat Credit Rules, 2004.

The assessee approached the CESTAT in New Delhi, and the CESTAT set aside the order and remanded the matter to the adjudicating authority. The adjudicating authority decided the case in denovo proceedings. Aggrieved by the order, the assessee filed an appeal before the CESTAT, New Delhi.

The CESTAT held that the assessee was entitled to benefit from the CENVAT credit in respect of inputs contained in the work in progress and semi-finished products. The amendment is prospective in nature. It went into effect on only January 3, 2007. In the instant case, the period is anterior to 01-03-2007, which has no application. Therefore, the substantial questions of law raised in this appeal are answered in favor of the assessee and against the revenue.

The department appealed against the order of the tribunal.

The issues raised were as follows:

1. Whether the assessee has the obligation to comply with Rule 11(3)(ii) of the Cenvat Credit Rules, 2004 in order to avail the benefit of exemption notification No. 30/2004-CE dated July 9, 2004?
2. Whether once the input credit is taken legally, then the same cannot be denied after the issue of exemption notification on the final product?
3. Whether the assessee who has taken credit for the input lying in the stock and those contained in semi-finished and finished goods are required to be reversed when the final product is exemplified?

The court issued notice of admission of appeal to the respondent-assessee within one week, returnable within four weeks, and listed the matter on March 13, 2024.

Counsel For Appellant: Shrestha Mathur

Counsel For Respondent: None

Case Title: Union Of India Versus Suzuki Textiles Limited

Case No.: D.B. Central/excise Appeal No. 4/2020

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