2014 (12) TMI 943 - AT - Central Excise

Time limit for availing Cenvat Credit after the receipt of Inputs - credit availed after one year - Demand of interest on credit wrongly taken - Held that - As per the Cenvat Credit Rules credit of the duty paid on inputs/input services has to be taken immediately on receipt of the input/input services. Though the rule does not lay down any time limit, it is a settled position in law that a reasonable time limit has to be read into the law. In Central Excise matters, the normal period of limitation, both for demand of duty and also for claiming of refund is one year. Therefore, it is reasonable to read into the law a time limit of one year from the date of receipt of inputs for taking of the credit. Inasmuch as the appellant has not done this, the denial of Cenvat credit cannot be faulted. Secondly, it is noted that the appellant was availing the benefit of Notification No. 6/2002 wherein the final products manufactured by the appellant was cleared without payment of duty up to a quantity of 3500 MT. To be eligible for the credit, the final products should be dutiable. The denial of credit to the extent of ₹ 9,63,922/- has been made on the ground that the credit pertains to inputs which have gone into the manufacture of exempted final products. Therefore, the denial of credit, in these circumstances, by the lower authorities cannot be faulted. Consequently, the appellant would be liable to pay interest on the Cenvat credit wrongly taken. Appellant took credit on 30-5-2006 and intimated the department accordingly. Therefore, it cannot be said that the appellant suppressed the fact of taking of any credit so as to attract mandatory penal provisions under Section 11AC. Therefore, the imposition of equivalent amount of penalty under Section 11AC read with Rule 15 of the Cenvat Credit Rules, 2004 is not warranted and accordingly I set aside the same. - I uphold the denial of Cenvat credit to the extent of ₹ 9,63,922/- along with interest thereon under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944. However, I set aside the penalty of equivalent amount under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 - Decided partly in favour of assesse.

Summary

Issues:
1. Disallowance of Cenvat credit on inputs used in the manufacture of exempted final products.
2. Time limit for availing Cenvat credit.
3. Liability for penalty under Section 11AC.

Analysis:

Issue 1: Disallowance of Cenvat credit on inputs used in the manufacture of exempted final products
The appellant, a manufacturer of kraft paper, availed excise duty exemption on their products but later claimed Cenvat credit on inputs used in manufacturing. The department disallowed a portion of the credit, attributing it to inputs used in exempted final products. The appellate authority upheld this denial, citing that for Cenvat credit, final products should be dutiable. The denial was deemed valid, and the appellant was held liable to pay interest on wrongly taken credit.

Issue 2: Time limit for availing Cenvat credit
The appellant took the Cenvat credit after a delay of 5 years, which was contested by the Revenue. While the rules do not specify a time limit, a reasonable period is implied. The judgment established a one-year limit from the receipt of inputs for claiming credit. As the appellant exceeded this timeframe, the denial of Cenvat credit was deemed justified.

Issue 3: Liability for penalty under Section 11AC
Regarding the imposition of a penalty under Section 11AC, it was noted that the appellant had intimated the department about taking credit, negating any suppression of facts. Consequently, the penalty of an equivalent amount was set aside as it was deemed unwarranted. The judgment clarified that the appellant was not liable for penalty under Section 11AC.

In conclusion, the appeal was partly allowed, upholding the denial of a specific Cenvat credit amount with interest but setting aside the penalty under Section 11AC. The judgment provided a detailed analysis of the issues involved, emphasizing compliance with Cenvat credit rules and the implications of claiming credit on inputs used in exempted final products.