EXCISE Appeal No. 11587 of 2015-DB
[Arising out of Order-in-Original/Appeal No SIL-EXCUS-000-COM-038-14-15 dated
12.06.2015 passed by Commissioner of Central Excise, Customs and Service Tax-SILVASA]
Ruia Rayon Pvt Ltd
VERSUS
C.C.E & S.T.-Silvasa
WITH
Excise Appeal No. 11731 of 2015 (Shubh Nil Yarns Pvt Ltd)
Excise Appeal No. 11776 of 2015 (D D Sharma)
Excise Appeal No. 10077 of 2016 (Rajesh Ramniranjan Ruia)
Excise Appeal No. 11304 of 2016 (Patolia Filaments P Ltd)
Excise Appeal No. 11306 of 2016 (Sudhir Patodia)
Excise Appeal No. 10524 of 2019 (Sumita Tex Spin Pvt Ltd)
Excise Appeal No. 10525 of 2019 (Sumita Tex Spin Pvt Ltd)
Excise Appeal No. 11620 of 2015 (Sumita Tex Spin Pvt Ltd)
Excise Appeal No. 11778 of 2015 (Tarachand Chaudhry)
Excise Appeal No. 10078 of 2016 (Sushil Basudev Mandal)
Excise Appeal No. 10412 of 2013 (Sunflag Filaments Industries)
Excise Appeal No. 10413 of 2013 (Rajkumar Satyanarayan
Agrawal)
Excise Appeal No. 10414 of 2013 (Satyanarayan Heeralal
Agrawal)
Excise Appeal No. 10415 of 2013 (Sandeep Satyanarayan
Agrawal)
APPEARANCE:2
Sh. Suyog Bhave, Shri Mohit Rawal, Advocates for the Appellant
Sh. Vijay G. Iyengar, Superintendent (Authorized representative) for the
Respondent
CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR
HON’BLE MEMBER (TECHNICAL), MR. RAJU
Final Order No. A/ 10071-10085 /2023
DATE OF HEARING: 12.01.2023
DATE OF DECISION: 20.01.2023
RAMESH NAIR
The issue involved in the present case is that whether the appellant is
entitled to carry forward the Cenvat credit after the date of availment of
exemption Notification No. 30/2004-CE dated 09.07.2004, in terms of Rule
11(3) of the Cenvet Credit Rules, 2004 and whether the said credit can be
utilised for payment of duty. The case of the Department is that as per Rule
11(3) of Cenvat Credit Rules, 2004, if the appellant avail the exemption the
Cenvat credit on the stock as on the date of opting for the said exemption
Notification No. 30/2004-CE shall stand lapse and consequently, the same
cannot be utilised for payment of duty.
Shri Suyog Bhave with Shri Mohit Rawal, Learned Counsels appearing
on behalf of the appellant submits that the bar under Rule 11(3) of Cenvat
Credit Rules, 2004, is only in respect of absolute exemption Notification and
the same does not apply in respect of the conditional exemption Notification.
It is his submission that Notificaiton No. 30/2004- CE dated 09.07.2004, is
admittedly a conditional notification. Therefore, for availing the said
notification the provision for lapsing of credit as provided under Rule 11(3)
Cenvat Credit Rules, 2004, does not apply. He further submits that in the
present appeals there is a demand towards the utilization of the same Cenvat
credit which according to department has lapsed. He submits that since the
credit was rightly carry forwarded and the same is not liable to be lapsed the 3
utilisation thereof is in order. Accordingly, the demand towards utilisation of
such Cenvat credit will also not sustain.
Shri Vijay G. Iyengar, Learned Superintendent (Authorized
Representative) appearing on behalf of the revenue reiterates the findings of
the impugned order.
We have carefully considered the submissions made by both the sides
and perused the records. We find that the entire case of the department is
that since the appellant have availed the exemption Notification No. 30/2004-
CE dated 09.07.2004, they are not entitled to carry forward the accumulated
Cenvat credit as on date of exemption Notification. Accordingly, the same was
not eligible for utilisation for payment of duty. In the facts of the present case
the notification No. 30/2004-CE is admittedly a conditional one. In terms of
strict provision of Rule 11(3) of Cenvat Credit Rules, 2004, the bar of lapsing
of credit is applicable only when the assessee avail the absolute exemption
notification. Therefore, in the present case exemption notification No.
30/2004-CE, being a conditional one, bar of lapsing of credit shall not apply.
This issue has been considered in various judgments as cited by the appellant,
which are reproduced below:
Patodia Filaments Pvt Ltd.Vs. Commr- 2019 (4) TMI 435- CESTAT,
Ahmedabad.
“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 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-CE dated 09.07.2004. Therefore, the balance credit is not 4
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.
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.”
Union of India Vs. Kanchan India Limited, 2019 (7) TMI 1583- Rajasthan
High Court.
“1. The question of law suggested by the Revenue in the present
case involves interpretation of Rule 11(1) of the Cenvat Credit
Rules, 2004 (for short, the Rules of 2004′).
- The assessee-respondent had resisted a show cause notice
which sought to invoke Rule 11(3) and lapsed Cenvat Credit on
the ground that the final product was duty exempt by virtue of
notification No.30/2004 dated 09.07.2004. The show cause
notice was made absolute and the Cenvat Credit was directed to
lapse.
- The CESTAT which issued the impugned order in the appeal
preferred by the respondent-assessee relied upon its previous
order in Jansons Textile Processors. vs. Commissioner, Central
Excise & ST Salem – 2018 (7) TMI 850 (CESTAT), Chennai. That
case too was concerned with the exemption availed by the
assessee in terms of the notification no.30/2004. The CESTAT
pertinently held as follows:-
“5. After haring 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)(1) of CCR would
apply which does not mandate any such lapsing.”
- In the present case too, the goods are conditionally exempt,
as is evident from S.No.10 of the notification no.30/2004. As the
goods are not absolutely exempt and the exemption is granted
only on fulfillment of certain conditions, clearly Rule 11(3) (1) of
the Rules of 2004 would apply. The said R21 reads as follows:-
“(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 5
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”
- In the present case as well, the exemption is not absolute but
conditional upon fulfillment of certain stipulations. The assessee
was entitled to the benefit of Rule 11(3)(i) of the Rules of 2004.
- The Court is, therefore, of the opinion that no substantial
question of law arises in this appeal. The present appeal is
accordingly dismissed.”
Sunfab Sales and Industries Ltd. Vs. CCE & ST .Silvasa – 2022 (1) TMI
259- CESTAT Ahmedabad.
“4. We have carefully considered the submissions made by both the sides
and perused the records. We find that the limited issue to be decided by
us is that when the appellant has availed the exemption Notification No.
30/2004-CE dated 09.07.2004 which prescribed the nil rate of duty but
bearing condition that no Cenvat credit should be availed whether Cenvat
credit lying in balance after reversal on inputs, WIP and inputs contained
finished goods, shall lapse in terms of Rule 11(3). For the ease of
reference we reproduced 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.”
From the plain reading of the above rule 11(3) (i) (ii) it is clear that in
terms of Clause (ii) of Rule 11(3) the balance credit shall lapse only if
the assessee availed an exemption which is absolutely and exempted
which is other than absolute covered under clause (i) of Rule 11(3). In
case of clause (i) of Rule 11(3) no similar condition of lapsing of balance
cenvat credit is provided. In the present case undisputedly the appellant
have availed the benefit of Notification No 30/2004-CE which is a
conditional one and the said condition prescribed is “provided that
nothing contained in this notification shall apply to the goods in respect 6
of which credit of duty on inputs has been taken under the provision of
the Cenvat Credit Rules, 2002”.
4.1 Since the Notification No. 30/2004-CE dated 09.04.2007 contains
the above condition the notification is not absolutely therefore, the
situation of the appellant is covered under Rule 11(3)(i) according to
which the appellant is required to pay an amount equivalent to Cenvat
Credit, if any taken by him in respect of inputs received for used in the
manufacture of said final product and is lying in stock or in process or is
contained in the final product or lying in stock but if the Notification is
absolutely having no condition in terms of Rule 11(3)(ii) the remaining
credit shall lapse and shall not be allowed to be utilized. The case of the
appellant is covered by rule 11(3) (i) therefore, the remaining credit
shall not lapse. One of the contention by the adjudicating authority is
that even though the argument of the appellant that the Cenvat credit
balance will lapse as per Rule 11(3) only, the product is exempted
absolutely is accepted there is no dispute that Notification No. 30/2004-
CE has been issued under section 5A of the Central Excise Act, 1944 and
the appellants having opted for the same, cannot escape from the
obligation relating reversal of balance Cenvat Credit. The relevant
section 5A is reproduced below:-
“[5A. Power to grant exemption from duty of excise.- (1)If the Central
Government is satisfied that it is necessary in the public interest so to
do, it may, by notification in the Official Gazette, exempt generally either
absolutely or subject to such conditions (to be fulfilled before or after
removal) as may be specified in the notification, excisable goods of any
specified description from the whole or any part of the duty of excise
leviable thereon:
Provided that, unless specifically provided in such notification, no
exemption therein shall apply to excisable goods which are produced or
manufactured-
(i)in a[free trade zone[or a special economic zone]] and brought to any
other place in India; or
(ii)by a hundred per cent export-oriented undertaking and [brought to
any other place in India].
Explanation.-In this proviso,[“free trade zone” [“special economic
zone”]] and “hundred per cent. export-oriented undertaking” shall have
the same meanings as in Explanation 2 to sub-section (1) of section 3.
[(1A)For the removal of doubts, it is hereby declared that where an
exemption under sub-section (1) in respect of any excisable goods from
the whole of the duty of excise leviable thereon has been granted
absolutely, the manufacturer of such excisable goods shall not pay the
duty of excise on such goods.]
…………
In the aforesaid section 5A in Sub-section (1) exemption is of two
category one is exemption which exempt the goods absolutely and other
is subject to such condition as specified in the Notification. In terms of
Sub-section (1A) which makes clear distinction that in case of exemption
granted absolutely the manufacturer of excisable goods shall not have
any option except to pay the duty. The only option is to avail the
exemption and no duty shall be paid. Therefore there is a clear
distinction between an absolute exemption and conditional exemption.
Therefore, the contention of the adjudicating authority that since the
exemption notification was issued under section 5A the appellant is 7
otherwise required to pay balance credit is of no substance and has no
basis.
4.2 We find that this issue has been considered by the tribunal time and
again and after interpreting Rule 11(3) (i) and (ii) came to conclusion
that in case of conditional notification the assessee is not required to
lapse the remaining credit after reversal on input as such, input in
process and input contained in finished goods. The relevant judgments
are reproduced below:-
CCE Vs. Orient Syntex- 2020 (40) GSTL 56 (T)
“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.”
- As per the above condition, the exemption Notification No. 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, –
(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-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 8
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.”
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 [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 Processorsv.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-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 lapsing.9
- We draw our support from the decision of CESTAT Chennai in the
case of Janson Textile Processors v. 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 v. 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.
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.10
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,
……………..
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.”
- 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-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.
- 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.”
Jansons Textile Processors v. Commissioner -2018 (7) TMI 850- (T)
“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-rule 3 (i) and 3 (ii). For better understanding, the relevant
provisions relating to manufacturers are reproduced under :
“RULE:-11.Tansitional 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 finalproduct 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 11
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
- UOI, AIR 1961 SC 935; Firoj Farukee v. State of West Bengal,
AIR1972 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 bo0th’ 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 conditionality.
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,
….. taken by him in respect of inputs received for use in the
manufacture of the final product and is lying in stock……or in process
…..or is contained in the final product lying in stock.
There is no other requirement that the assessee falling within the
scope of sub-rule 3 (i) will be required further to do. On the other
hand, sub-rule (3) (ii) ibid will cover the situation where the said final
product has been exempted absolutely under Section 5A ibid.
5.5 Sub-rule (3) (i) ibid will apply when the assessee opts for an
exemption from the whole of duty of excise leviable under a
notification issued under Section 5A of the Central Excise Act, 1944.
Sub-rule (3) (ii) ibid will be attracted only to those assessees who are
confronted with absolute exemption in respect of final product/s
manufactured by them, in which case the entire balance of cenvat
credit lying in his account shall lapse and the same shall not be
allowed to be utilized for payment of duty for home consumption or
for export.12
5.6 Hence, in sub rule 3 (i) ibid, the assessee has to ‘opt’ for the
exemption whereas in sub-rule 3 (ii) ibid, there is no such option
available to the assesse and the absolute exemption that may have
been brought forth under Section 5A ibid would apply unilaterally to
the related final product manufactured by the assessee.
5.7
It is important to note that the law makers have not
incorporated the requirement of payment of cenvat credit equivalent
to credit taken by the assessee in respect of inputs lying in stock or
in process in sub rule 3 (ii) ibid. In our view, this is because once the
entire cenvat credit account is reduced to naught, there will be no
cenvat credit that will be available whatsoever, under sub-rule 3 (ii)
ibid, for the assessee to avail.
6 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.
CCE Vs Sitaram India Ltd- 2018(10) TMI 11- CESTAT NEW DELHI
“6. The respondent who was availing the benefit of cenvat credit under
7 Cenvat Credit Rules, 2004, opted for exemption granted by
Notification No.30/2004 ibid, w.e.f. 01.04.2013. The dispute has arisen
consequent to such a move on the part of the respondent. Rule 11 of
Cenvat Credit Rules, 2004 outlines the transitional provisions which are
required to be followed by an assessee opting from the route of payment
of duty to that of availing exemption. The question for decision is
whether the respondent will be covered by the provisions of Rule
11(3)(i) or 11(3)(ii).
- We find that the identical issue has been considered in detail in the
case laws relied by the respondent. In the case of Jansons Textile
Processor (supra), the Chennai Bench of the Tribunal has taken the view
that in case of conditional exemption such as exemption under
Notification No. 30/2004, the assessee will be covered only by Rule
11(3)(i). This decision has been followed in the case of Wearit Global
Ltd. (supra) wherein the Tribunal observed as under:
“5. after hearing both the parties, we are of the opinion
thatinthe 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.
- By following the settled position of law as above, I find no
infirmity in the impugned order passed by the Commissioner
(Appeals).The same is sustained and the appeals filed by
Revenue are rejected.”13
Wearit Global Ltd Vs CCE-2018(8) TMI 1094 CESTAT NEW DELHI
- 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.
- 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.Transitionalprovision.
…. …. …..
(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 Atmaramv.UOI, AIR 1961 SC 935; Firoj Farukee
- 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 14
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,
- 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.”
- 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.”
From the above it can be seen that on the absolute identical issue involving
the exemption notification 30/2004-CE the tribunal in various judgments
held that balance credit shall not lapse in terms of Rule 11(3) of Cenvat
Credit Rules, 2004 therefore the issue is no longer res-integra.
- Accordingly, the impugned order is set aside and appeal is allowed.”
In view of the above judgments the issue is no longer res integra.
Accordingly, following the above judgments the impugned orders are not
sustainable, hence the same are set aside. The appeals are allowed.
(Pronounced in the open Court on 20.01.2023)
(RAMESH NAIR)
MEMBER (JUDICIAL)
(RAJU)
MEMBER (TECHNICAL)
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