2015 (8) TMI 1369 - AT - Central Excise

CENVAT credit - denial on the ground that the provisions of Rule 3(4) and Rule 3(5) of the CCR have not been complied with inasmuch as the appellant is not the consignee of those goods - whether the appellant is eligible for the cenvat credit and non-observance of the procedural formalities cannot take away the substantive right for availment of cenvat credit? - Held that - the credit attributable to those disputed invoices have been taken by the appellant alone, and as such, there is no question of misuse of cenvat credit by anybody else - since Cenvat Credit Rules are beneficial provisions incorporated to reduce the cascading effect of Central Excise duty, in absence of any specific finding that the cenvat credit has been fraudulently availed, the said benefit cannot be denied in view of the fact that the capital goods have been received in the factory and used for the intended purpose - cenvat credit cannot be denied for non-observance of procedural conditions. Extended period of limitation - Held that - Since the facts were known to the Department regarding taking of cenvat credit on the disputed invoices way back in 2003, the Show Cause proceedings initiated in 2006 is clearly barred by limitation of time and the demand cannot be fastened against the appellant - extended period not invocable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Compliance with Rule 3(4) and Rule 3(5) of the Cenvat Credit Rules for cenvat credit eligibility.
2. Scope of taking irregular cenvat credit by the appellant.
3. Bar on limitation for Show Cause proceedings initiation.
4. Denial of cenvat credit for non-observance of procedural conditions.

Compliance with Rule 3(4) and Rule 3(5) of the Cenvat Credit Rules:
The appellant, a job worker, received capital goods directly from the principal manufacturer for job work activities and claimed cenvat credit based on the manufacturer's invoices. The Department disputed the credit due to non-compliance with Rule 3(4) and Rule 3(5). The Additional Commissioner upheld the credit eligibility, emphasizing substantive rights over procedural formalities. The Tribunal noted that the principal manufacturer did not claim the credit, supporting the appellant's position. Citing precedent, the Tribunal allowed the credit, emphasizing the beneficial nature of Cenvat Credit Rules.

Scope of taking irregular cenvat credit by the appellant:
The appellant argued that the endorsement on the invoices allowed for cenvat credit, citing a previous Tribunal decision. The Department contended that non-compliance justified denying the credit. The Tribunal found in favor of the appellant, highlighting the absence of misuse and the intended use of the capital goods. It emphasized the importance of reducing the cascading effect of Central Excise duty and allowed the credit despite procedural lapses.

Bar on limitation for Show Cause proceedings initiation:
The appellant argued that the Show Cause proceedings initiated in 2006 were time-barred as the Department was aware of the disputed documents in 2003. The Tribunal agreed, stating that when both parties are aware of the facts, the extended period of limitation cannot be invoked. As such, the demand against the appellant was deemed invalid due to the time limitation.

Denial of cenvat credit for non-observance of procedural conditions:
The Tribunal concluded that the appeal should be allowed on merit and limitation grounds. It set aside the impugned order, allowing the appeal in favor of the appellant. The decision was based on the appellant's right to claim cenvat credit, the absence of misuse, and the time limitation on the Show Cause proceedings.