2010 (5) TMI 748 - AT - Central Excise

MODVAT/CENVAT Credit - denial on the ground that the same has been taken after a period of one year from the date of issue of permissible modvatable document - Held that - In the case of M/s. Pierlite India Pvt. Ltd. v. C.C.E. Ahmedabad 2009 (9) TMI 115 - CESTAT, AHMEDABAD , the credit of tax availed after one year was held to be admissible. Also, the provisions of Rule 4(1) which are to the effect that Cenvat credit in respect of inputs may be taken immediately on receipt of the inputs in the factors of manufacturer. The use of expression may be is in fact, is relaxation given to the manufacturer to avail the credit immediately. This can never be interpreted in the manner that the credit not taken immediately would not be available to the manufacturer. There is no justification for denial of credit or for imposition of penalty - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of Modvat Credit on the grounds of late availment.
2. Interpretation of Rule 4(1) of Cenvat Credit Rules, 2004 regarding the time limit for taking credit.
3. Precedent cases regarding the admissibility of credit availed after one year.
4. Interpretation of the expression "may be" in Rule 4(1) regarding immediate availment of credit.

Analysis:

1. The issue in this case pertains to the denial of Modvat Credit amounting to Rs. 1,71,799/- due to late availment by the appellant. The Commissioner (Appeals) held that the credit was taken after one year from the date of the permissible modvatable document, deeming it unreasonable and disallowing the credit.

2. The appellant argued that Rule 4 of the Cenvat Credit Rules, 2004 does not specify a time limit for taking credit. The appellant cited lack of coordination between departments and human error as reasons for the delay in availing the credit. The appellant contended that as long as there is no doubt about the receipt and utilization of inputs in manufacturing, denying credit for late availment is unjustified.

3. The Tribunal referred to the case of M/s. Essar Steel Ltd. v. CCE, Surat, where it was observed that the amended provisions of the Cenvat Credit Rules do not set an upper time limit for allowing credit. Additionally, a Board circular stated that a manufacturer can take credit upon receipt of inputs in the factory, emphasizing that delayed credit availing does not warrant denial of benefits. Another case, M/s. Pierlite India Pvt. Ltd. v. C.C.E. Ahmedabad, held that availing credit after one year is permissible based on Tribunal precedent.

4. The Tribunal analyzed Rule 4(1), noting that the expression "may be" regarding immediate credit availment actually provides a relaxation to manufacturers, indicating that immediate availment is not mandatory. Thus, the rule does not imply that credit not taken immediately is unavailable to the manufacturer.

5. Consequently, the Tribunal found no justification for denying credit or imposing penalties. The impugned order was set aside, and the appeal was allowed with consequential relief, leading to the disposal of the stay petition.