2010 (5) TMI 413 - AT - Central Excise

SSI exemption - subject to condition that while availing full duty exemption, they do not avail input duty Cenvat credit - start paying full duty and availing Cenvat credit as soon as their clearances cross Rs. one crore - clearances crossed the limit of Rs. one Crore only on 20-9-01, they started availing the Cenvat credit from 1-9-09 - were availing full duty exemption, the finished product being fully exempt from duty, the Appellants were not eligible for input duty credit Held that - Appellants have declared as to on which date the exemption limit of Rs. one crore was crossed by them and accordingly from which date, they became eligible for Cenvat credit and on which date the Cenvat credit in respect of inputs had been taken. Just giving consolidated figure of total Cenvat credit-availed during July 01-Sept 01 period does not amount to disclosing all the relevant facts and from the facts disclosed in the quarterly ER-1 return, it was not possible for Departmental Officers to ascertain as to whether the Cenvat credit taken by them during quarter ending 2001 had been taken only after crossing the limit of Rs. one crore - full facts had not been disclosed and hence longer limitation period has been rightly invoked by the Department - appeal is dismissed.

Issues:
1. Availing of Cenvat credit during the period of full duty exemption under Notification No. 8/2001-C.E.
2. Permissibility of switching over from Notification No. 8/2001-C.E. to Notification No. 9/2001-C.E.
3. Applicability of longer limitation period for recovery of wrongly taken Cenvat credit.

Analysis:

1. The Appellants were engaged in manufacturing road construction equipment chargeable to Central Excise Duty under specific sub-headings. They were availing SSI exemption under Notification No. 8/2001 and Cenvat credit facility. A show cause notice was issued for allegedly wrongly availing Cenvat credit during the period of full duty exemption. The Assistant Commissioner confirmed the demand, and the Commissioner (Appeals) upheld the decision. The Appellant argued they lawfully took the credit, citing a Tribunal judgment in a similar case. However, the Tribunal found that under Notification No. 8/2001, the Appellants could not avail input duty credit during the full exemption period, rejecting their plea and upholding the demand for recovery of wrongly taken Cenvat credit along with interest and penalty.

2. The Appellant contended that switching over from Notification No. 8/2001-C.E. to Notification No. 9/2001-C.E. was permissible at any time. The Tribunal disagreed, stating that under Notification No. 9/2001, duty was payable at a concessional rate only after crossing the one crore limit, whereas under Notification No. 8/2001, full duty exemption was allowed for the first one crore clearances without Cenvat credit. The Tribunal held that the Appellants could not switch to Notification No. 9/2001 for concessional rate duty with Cenvat credit facility while availing full duty exemption under Notification No. 8/2001.

3. The Appellant argued that the longer limitation period for recovery of wrongly taken Cenvat credit was not applicable as they had declared the payment of duty through Cenvat in their ER-1 return. However, the Tribunal found that the Appellants did not disclose all relevant facts in the return, failing to specify the date of crossing the exemption limit and when the Cenvat credit was taken. As a result, the Tribunal upheld the longer limitation period invoked by the Department for recovery, dismissing the appeal and affirming the impugned order.

In conclusion, the Tribunal rejected the Appellant's arguments regarding the availing of Cenvat credit during full duty exemption, switching over between exemption notifications, and the applicability of the longer limitation period. The demand for recovery of wrongly taken Cenvat credit, along with interest and penalty, was upheld, and the appeal was dismissed.

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