2012 (4) TMI 501 - AT - Central Excise

Waiver of pre-deposit of duty - Denial of CENVAT Credit - denial the credit in present proceedings on the ground that the circular, dated 1-2-2007 is prospective nature and in view of the provisions of Rule 4 of the Cenvat Credit Rules which provides that the Cenvat Credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer of output service - Held that - proviso to notification No. 30/2004-C.E., dated 9-7-2004 states that nothing contained in this notification shall apply to the goods in respect of which the credit of duty on inputs has been taken under the provisions of the CENVAT Credit Rules, 2004 . Therefore, it is clarified that non-availment of credit on inputs is a precondition for availing exemption under this notification and if manufacturers avail input tax credit, they would be ineligible for exemption under this notification. Textile manufacturer/processors have to use common inputs, which are used in a continuous manner, and it may not be practically possible to segregate and store inputs like dyes and chemicals separately or maintain separate accounts. In such cases, in order to facilitate simultaneous availment of the two notifications, such manufacturers may be advised not to take credit initially and instead take only proportionate input credit on inputs used in the manufacture of finished goods cleared by him on payment of duty. Such proportionate credit should be taken at the end of the month only. At the time of audit of records, or at any other time if the department requires, the assessee should support of such credit availment with the relevant records maintained by them showing input quantity used for the goods manufactured and cleared on payment of duty. In case any subsequent verification reveals that such proportionate credit taken is incorrect, the penal provisions as prescribed under the law will be taken against such assessees - prima facie the applicants has made out a strong case, therefore the pre-deposit of dues are waived and recovery of the same is stayed during the pendency of the appeal - Stay granted.

Summary

Issues:
Waiver of pre-deposit of duty, interest, and penalties; Denial of credit for the period April 2005 to October 2007; Interpretation of Board Circulars; Prospective vs. retrospective nature of circulars; Applicability of Rule 4 of Cenvat Credit Rules; Reasonable period for recovery of wrongly availed credit.

Waiver of Pre-deposit of Duty:
The applicant sought waiver of pre-deposit of duty, interest, and penalties amounting to Rs. 55,69,132/-, which were confirmed due to denial of credit for the period April 2005 to October 2007. The applicants were engaged in manufacturing yarn and manmade fabrics, claiming benefits under Notification No. 29/2004-C.E. and Notification No. 30/2004-C.E. The revenue denied the credit based on the prospective nature of Board Circular dated 1-2-2007, while the applicant argued that the circular was clarificatory and not prospective. The Tribunal considered the difficulties faced by the manufacturer and the procedure prescribed in the circular, ultimately waiving the pre-deposit of dues and staying the recovery during the appeal.

Interpretation of Board Circulars:
The crux of the dispute revolved around the interpretation of Board Circulars issued in 2004 and 2007. The circulars provided guidelines on maintaining separate records for common inputs used in manufacturing final products under different notifications. The revenue contended that the 2007 circular was prospective, while the applicant argued it was clarificatory. The Tribunal analyzed the circulars, emphasizing that the procedure laid down after the circular allowed for proportionate credit at the end of the month, supporting the applicant's case for waiver of pre-deposit.

Prospective vs. Retrospective Nature of Circulars:
The revenue asserted that the 2007 circular was prospective, setting guidelines for future compliance. However, the applicant maintained that the circular was clarificatory and did not impose a time bar on taking credit. The Tribunal examined the circular's language and intent, concluding that the procedure outlined was applicable to the period in dispute, supporting the applicant's contention and decision for waiving the pre-deposit of dues.

Applicability of Rule 4 of Cenvat Credit Rules:
The applicant argued that Rule 4 of Cenvat Credit Rules allowed immediate credit upon receipt of inputs without usage, and there was no time bar for taking credit subsequently. The revenue relied on the rule to deny credit based on the prospective nature of the circular. The Tribunal analyzed the provisions of Rule 4 in conjunction with the circulars, ultimately siding with the applicant's interpretation and granting the waiver of pre-deposit.

Reasonable Period for Recovery of Wrongly Availed Credit:
Both parties cited previous Tribunal decisions regarding the reasonable period for recovery of wrongly availed credit. The applicant referenced a case specifying a one-year period for recovery, while the revenue relied on a different case suggesting a reasonable period could extend to one year. The Tribunal examined these precedents and the specific circumstances of the present case, ultimately supporting the applicant's argument and granting the waiver of pre-deposit during the appeal process.