By TIOL News Service

MUMBAI, JULY 27, 2016: THE appellant availed CENVAT Credit of an amount of Rs.3,49,724/- on the services related to certain modernization and renovation activities of the existing factory premises.

It was alleged in the SCN that since the appellant had cleared the goods viz. Draw Textured Yarn (DTY) and Pet Wash Flake at NIL duty under exemption notification 30/2004-CE& 4/2006-CE, they are not entitled for CENVAT credit.

The credit was disallowed by the adjudicating authority and the same was upheld by the Commissioner (A). However, he reduced the penalty imposed of Rs.3,49,724/- to Rs.2000/-.

The assessee is aggrieved and, therefore, before the CESTAT.

The appellant submitted that the entire case proceeds on wrong footing that the CENVAT credit was taken and the goods were cleared under exemption. It is further submitted that during the receipt of services, no goods were cleared under exemption i.e. during May 2009 to February 2010.

The AR while reiterating the findings of the lower authorities submitted that it is admitted fact that in May, 2009 the appellant have cleared the goods under exemption Notification No. 30/2004-CE dated 09.07.2004, therefore, they were not entitled to avail the CENVAT Credit.

The Bench observed –

"7. I find that the appellant have availed the CENVAT credit in respect of input services of renovation and modernization of their factory for in house manufacturing of partially oriented Yarn, on which they have discharged the Excise duty. As regard the exemption availed by the appellant under Notification No. 30/2004-CE, the said exemption was not availed on POY Yarn for which the renovation and modernization of plant was undertaken. Therefore the service on which CENVAT credit was taken were not used for manufacturing of exempted goods. It is also admitted fact that the appellant have not cleared any goods under exemption during and after the renovation and modernization of plant of the appellant…."

Holding that there is no reason for denying the CENVAT credit, the impugned order was set aside and the appeal was allowed.

(See 2016-TIOL-1865-CESTAT-MUM)