M/S Mohit Industries Ltd vs Union Of India on 21 February, 2023
5.12. The utilization of lapsed credit is a double loss to the
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exchequer to the extent that the unit had not paid the Central
Excise Duty on their finished goods by opting for the benefits
under the Notification No.30/2004, but carried forward duty
paid on inputs which, in turn, is consumed for manufacturing
exempted goods in terms of Notification No.30/2004-CE. The
intention of legislature for providing the credit on input was
that the said credit would be utilized for payment of Central
Excise Duty on finished goods in order to reduce the
cascading effect of duty. Thus, the double benefit to the unit
i.e. nonpayment of Central Excise Duty on finished goods and
encashment of accumulated credit of input used in the
manufacture of exempted goods through the rebate of the
duty is not permissible in terms of scheme of CENVAT credit
particularly under provision of Rule 11 (3)(2) of CCR.
5.13. It is the say of the respondent that rebate under Rule 18
can only be granted of Excise Duty paid on the goods
exported. It has relied on the judgment of Bombay High Court
in case of Union of India vs. Rainbow Silks [2011 (274) ELT
510 (Bombay)] to urge further that the CENVAT credit
balance available in the account was to lapse at the time of
opting for complete exemption on their final product. The
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respondent unit has chosen not to adhere to the requirement
of the Rules and continued to retain a large amount of such
CENVAT credit. Therefore, it is open to the manufacturer to
pay the duties through CENVAT credit account by debit entry.
However, if any inadmissible CENVAT credit which should
correctly have lapsed is continued to be retained and if such
amount is utilized for the purpose of payment of the Central
Excise Duty, it would mean that the appropriate duty has not
been paid and the consequences of non-payment of duty were
followed.