[2016] 65 taxmann.com 130 (Ahmedabad-CESTAT) Sunflag Filaments Industries vs. Commissioner, Central Excise & Service Tax, Vapi

Facts
The Appellant opted for Exemption Notification No. 30/2004-CE for duty free clearances of their finished product on 01/08/2005 which was on the condition of nonavailment of CENVAT credit of duty on inputs or capital goods. Therefore, credit on inputs available in stock on that date was reversed and duty was paid on clearance of finished goods in stock on 01/08/2005. However, they also had excess credit in CENVAT account which pertained to the credit of duty on inputs which were already utilised in the manufacture of the finished goods which were cleared on payment of duty before the said date. In the absence of any clarification regarding treatment for such excess, the same was not reversed.

Subsequently, Rule 11(3) of CENVAT credit Rules, 2004 was inserted from 01/03/2007 providing lapsing of such excess CENVAT credit available on date of opting exemption notification. The Appellant did not allow such credit lying in their account as on 01/03/2007 to lapse and utilised portion of it for payment of duty for some other purposes. The Adjudicating authority held that because of this utilisation of excess credit as on 01/03/2007, the benefit of exemption notification was not available.

Held
The Tribunal observed that the Appellant fulfilled the conditions of the notification on the date of their opting for the same and thereafter. However, the only lapse was that they had not expunged the excess credit they had in their account when Rule 11(3) of the CENVAT Credit Rules 2004 was introduced on a subsequent date. In such circumstances violation of Rule 11(3) should invite necessary action under Rules 14 & 15 of CENVAT Credit Rules 2004 only and cannot be extended to the extent of denying the benefit of the substantial notification for that mere reason.