KTF Fashion Private Limited vs Commissioner Of Central Excise & ST, Ahmedabad-I

C.L. Mahar, Member (T)

Brief facts of the matter are that the appellant are engaged in the manufacture of branded as well as unbranded readymade garments falling under Chapter 61 of Central Excise Tariff Act, 1985. The department, on scrutiny of ER1 returns of the appellant for the period from October 2011 to November 2011 noticed that they had taken Cenvat credit as per Cenvat Credit Rules, 2004 and cleared branded readymade garments on payment of normal rate of duty. The department has also noted that the appellant has also cleared unbranded products without payment of duty by availing exemption under Notification No. 30/2004-CE dated 09.07.2004, as amended. It has been provided under the Notification No. 30/2004-CE that all excisable goods falling under Chapter 61 (other than those printed branded name or sold under a brand name) are exempted from whole of duty of excise subject to condition that no Cenvat credit on inputs or capital goods has been taken under the provisions of Cenvat Credit Rules, 2002. The department was of the view that the appellant was availing the benefit of exemption Notification No. 30/2004-CE dated 09.07.2004 for unbranded garments manufactured by them. However, in violation to the condition of Notification No. 30/2004-CE they have also availed benefit of Cenvat credit. In view of above facts, the department has issued show cause notice dated 02.11.2012 proposing demand of Central Excise duty amounting to Rs. 4,47,997/-. The matter got adjudicated vide order-in-original MP/06/AC/12-13/Dem dated 07.03.2013. The learned Adjudicating Authority has dropped the proceedings against the above mentioned impugned show cause notice. The department has preferred an appeal before the Commissioner (Appeals) who vide order-in-appeal dated 16.07.2013 confirmed the charges as leveled in the show cause notice.

None appeared on behalf of the appellant. Heard Shri Ajay Kumar Samota, learned Superintendent (AR) appearing for the department.

On perusal of record, we find that till June 2011 they were availing Cenvat credit on inputs used in both dutiable and exempted products for which they have reversed the 5% of value of exempted goods as well as the entire credit in the month of June 2011. After 2011 they have opted not to avail Cenvat credit on common input/ input service under the provision of Cenvat Credit Rules, 2004 read with conditions in Notification No. 30/2004-CE. We also note that for the period October 2011 to December 2011 which is the period of demand under the impugned show cause notice, the appellant have taken Cenvat credit on the returned branded excisable goods and to substantiate their claim, necessary credit notes were submitted by the appellant. The original adjudicating authority got the matter verified from the range Superintendent who vide letter dated 31.01.2013 stated that credit of Rs. 2,47,496/- taken by the appellant from July 2011 to March 2012 is matching the credit taken by the said assessee on returned finished branded dutiable goods.

The only question which need to be answered by us is whether the appellant have violated the condition of Notification No. 30/2004-CE dated 09.07.2004 during the period October 2011 to December 2011 by availing Cenvat credit on the inputs going into manufacture of unbranded garments falling under Chapter 61 of Central Excise Tariff Act, 1985. Since it is matter of fact and the concerned Range officer vide his letter dated 31.03.2013 has categorically stated that credit taken by the appellant during July 2011 to March 2012 is matching with the credit taken by them on the return of branded dutiable goods. The above report does not leave an iota of doubt that Cenvat credit taken by the appellant was on the return of the dutiable goods for which they were entitled to take Cenvat credit as per the provisions of Cenvat Credit Rules, 2004. We also find that no Cenvat credit has been taken on the inputs or capital goods which were used for unbranded garments for which the appellant has been availing exemption Notification No. 30/2004-CE dated 09.07.2004 as amended.

In view of the above, we find that there is no violation of the condition of the exemption Notification No. 30/2004-CE and thus we find the impugned order-in-appeal without any merit and we set-aside the same. Accordingly, the appeal is allowed.