Shree Shyam Synthetics  VERSUS C.C.E.  & S.T.-Vapi

Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO.3

Excise Appeal No.10726 of 2013

(Arising out of OIA-SRP-216-VAPI-2012-13 dated 15/01/2013 passed by Commissioner of Central Excise, Customs and Service Tax-VAPI)

 

Shree Shyam Synthetics 

VERSUS

C.C.E. & S.T.-Vapi

 

With

Excise Appeal No.10727 of 2013

(Arising out of OIA-SRP-216-VAPI-2012-13 dated 15/01/2013 passed by Commissioner of Central Excise, Customs and Service Tax-VAPI)

Surendra Jain Appellant

Manager & Authorised Signatory,

M/S. Shree Shyam Synthetics, 54/B, Piparia Indl Estate, Piparia, SILVASSA, UT OF DADRA & NAGAR HAVELI

VERSUS

C.C.E. & S.T.-Vapi Respondent

4th Floor Adharsh Dham Building,

Opp. Town Police Station, Vapi-Daman Road, Vapi Vapi, Gujarat-396191

APPEARANCE:

Shri Suyog Bhave, Advocate for the Appellant

Shri. Tara Prakash, Deputy Commissioner (AR) for the Respondent

 

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. C.L. MAHAR

Final Order No. A/ 10938-10939 /2023

 

 

 

 

RAMESH NAIR

DATE OF HEARING: 22.02.2023 DATE OF DECISION: 20.04.2023

 

 

The brief facts of the case are that the appellant are engaged in the manufacture of polyster texturized yarn, polyster filament yarn, poly yarn waste, POY Yarn waste falling under chapter no. 54 and 55 of the Central Excise Tariff Act, 1985. The appellant have opted for the notification no.

 

29/2004-CE dated 09.07.2004 and notification no. 30-2004-CE dated 09.07.2004 with effect from 14.06.2006 and intimation of the same was given to the department on 21.06.2006 along with details of the unutilized balance of finished goods, semi finished goods (WIP) and input. As per Annexure-A, they have reversed the cenvat credit of Rs.1,25,039/- on the inputs lying as balance, contained in WIP and finished goods thereafter, there was unutilized balance of cenvat credit lying in their RG-3A part II, RG23C amounting to RS.32,32,703/-. A show cause notice dated 20.06.2011 was issued to the appellant wherein, it was contended that the cenvat credit reversed in the stock of materials/inputs contained in their finished goods WIP and subsequently, the finished goods manufactured out of the said materials on which cenvat credit has been reversed was cleared without payment of duty under notification no. 30/2004-CE dated 09.07.2004.

1.1 It was further contended that in terms of Rule 11(3) of Cenvat Credit Rules, 2004 that the appellant had carried forward, the balance of cenvat credit to the tune of Rs. 32,32,703/- as shown in ER-1 return for the month of June, 2006 is not correct and liable to be recovered for the reason that the appellant have cleared the goods under exemption from whole of the duty of excise in terms of Notification no. 30/2004-CE consequently, the balance cenvat credit after reversal could not have been carried forward as the same shall stand lapsed. The adjudicating authority accepting the charge made in the show cause notice confirmed the demand of cenvat credit along with interest and equal penalty and also imposed personal penalty of Rs.1 lakh on Shri Surendra Jain, Manager of the appellant company.

2. Shri Suyog Bhave, learned counsel appearing on behalf of theappellant submits that the very issue involved in the present case is no longer res- integra as the same is covered by many judgments as cited below:-
   • JansonsTextile Processors- 2018 (7) TMI 850-CESTAT-CHENNAI
   • PatodiaFilaments  Ltd.- 2019 (4) TMI 435-CESTAT, Ahmedabad
   • KanchanIndia Limited- 2019 (7) TMI 1583- Rajasthan High Court
   • Synfab Sales and Industries – 2022 (1) TMI 259-CESTAT AHMEDABAD
   • OrientSyntex- 2020 (40) GSTL 56 (Tri.-)
   • RuiaRayon  Ltd & Ors.- 2023 (1) TMI 882-CESTAT AHMEDABAD

 

3. Shri Tara Prakash, learned Deputy Commissioner (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. The lower authorities have denied the carrying forward of balance credit on the ground that the same shall stand lapsed as the appellant have opted for full exemption under notification no. 30/2004- CE. We find that the provision for reversal of credit and lapse of balance creditis provided under Rule 11(3) of Cenvat Credit Rules, 2004 which reads 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, –

 

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

 

• 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.

 

(4) ]

 

From the careful reading of the above Rule 11(3), it makes clear that in case if assessee opts for the exemption from whole of the duty of excise leviable on the said final product under a notification issued under Section 5(A) of the Act and the said final product has been exempted absolutely under Section 5A of the Act, after deducting the cenvat credit in respect of inputs lying in stock or in process or contained in the final product, the remaining amount shall lapse. The said rule provides that in any case, the cenvat credit on stock of input lying in stock, in process and contained in finished goods needs to be reversed however, as regard the balance cenvat credit after such reversal shall lapse only in a case where the exemption notification is absolute. In the present case, notification no. 30/2004-CE is not a absolute notification as the same contains condition as below:

 

“Provided that nothing contained in this notification shall apply to the goods in respect of which credit of duty on input or capital goods has been taken under the provision of Cenvat Credit Rules, 2004”

Since the above condition in such case in terms of clause (ii) of Rule 11(3) of Cenvat Credit Rules, 2004, the provision of lapsing of balance cenvat credit was not applicable in the present case. This issue has been considered in many judgments which are cited by the appellant. In one of the judgment in the case of ORIENT SYNTEX, this tribunal considering the same issue and passed the following order:-

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. Asper the above condition, the exemption Notification  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, –

 

• he opts for exemption from whole of the duty of excise leviable on the saidfinal product manufactured or produced by him under a notification issued under Section 5A of the Act; or

 

• 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 theNotification 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.

 

• In case ofPatodia 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.”

 

• In the case ofKanchan 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. 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

 

6. We draw our support from the decision of CESTAT Chennai in the case ofJanson Textile Processors  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.

 

• 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 classesrepresenting alternatives [J. Jayalalitha  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.

 

• 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 separatealternatives, with distinctively different qualifying factors and

 

• 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

 

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 involvedin such case was eligibility of exemption Notification  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 ofSupertex 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  The impugned order is upheld and the Revenue‟s appeal is dismissed.

 

5. From the above decision of the tribunal and other judgments cited by the appellant, the issue is no longer res-integra accordingly, the impugned order being not sustainable in law and in fact, is set aside. Appeals are

(Pronounced in the open court on 20.04.2023 )

 

(RAMESH NAIR) MEMBER (JUDICIAL)

 

 

(C.L. MAHAR) MEMBER (TECHNICAL)