2015 (12) TMI 1307 - AT - Central Excise

Denial of CENVAT Credit - appellant availed the Cenvat Credit on Grey Fabrics against the endorsed invoices - Invocation of extended period of limitation - Held that - Rule 9 of the Cenvat Rules prescribed the documents for availment of the Cenvat Credit - On perusal of the Rule 9 of the Cenvat Credit Rules, it is clear that the Cenvat Credit cannot be allowed on the endorsed invoice. So, the appellant is not entitled to avail cenvat Credit on the basis of the endorsed invoices for the period of December 2004 to July 2006. Further, the appellant is a job worker. They received the Gray fabrics from the merchant/dealer for processing. With effect from 1.3.2003, the Central Excise Simplified Textile Scheme was implemented on the textile and garment sector. According to the said scheme, the merchant/supplier of the grey fabrics has deemed to be as manufacturer and permitted him (Merchant) to pay duty on processed fabrics manufactured as purchaser on job charges. There was an option that the merchant/supplier may discharge duty through the processor (job worker) and permitted the processor to avail credit on invoices in the name of the merchant endorsed by such merchants. The said scheme was withdrawn with effect from 10.9.2004. To sum up, the job worker is not entitled to avail cenvat credit after 10.9.2004 on endorsed invoices. - Central Excise audit officers during the verification of the records detected the irregular availment of the Cenvat Credit. Hence the extended period of limitation involved. - Decided against assessee.

Summary

Issues:
1. Denial of Cenvat Credit on grey fabrics endorsed invoices.
2. Interpretation of Rule 9 of Cenvat Credit Rules 2004.
3. Applicability of Central Excise Simplified Textile Scheme.
4. Limitation period for filing the appeal.

Analysis:

Issue 1: Denial of Cenvat Credit on grey fabrics endorsed invoices
The appellants, as processors of Man Made Gray Fabrics, received duty paid grey fabrics from dealers and availed Cenvat Credit based on endorsed invoices. The dispute arose when a show cause notice was issued to deny the Cenvat Credit. The appellant argued that as job workers, they were entitled to avail the credit as per previous decisions. However, the Revenue contended that there was no provision in the Cenvat Credit Rules 2004 to allow credit on endorsed invoices. The Tribunal examined Rule 9 of the Rules, which specifies the documents for availing Cenvat Credit. It was concluded that the Cenvat Credit cannot be allowed on endorsed invoices, leading to the rejection of the appellant's appeal.

Issue 2: Interpretation of Rule 9 of Cenvat Credit Rules 2004
The Tribunal focused on Rule 9 of the Cenvat Credit Rules, which outlines the documents required for claiming Cenvat Credit. The rule specifies various documents like invoices, supplementary invoices, bills of entry, and certificates for different scenarios. It was emphasized that the rule does not permit availing Cenvat Credit based on endorsed invoices. This interpretation was crucial in deciding the eligibility of the appellants to claim the credit.

Issue 3: Applicability of Central Excise Simplified Textile Scheme
The Tribunal highlighted the Central Excise Simplified Textile Scheme, which deemed the merchant/supplier of grey fabrics as manufacturers for duty payment purposes. Under this scheme, job workers were allowed to avail credit on invoices endorsed by merchants. However, the scheme was withdrawn in 2004, affecting the entitlement of job workers like the appellants to claim Cenvat Credit on endorsed invoices post-2004. This historical context was significant in determining the appellant's eligibility for the credit.

Issue 4: Limitation period for filing the appeal
The appellant argued that the demand was barred by limitation, citing the lack of disclosure of endorsed invoices to the department. However, the Tribunal noted that the Central Excise audit officers detected the irregular credit availment during verification, justifying the extended limitation period. The appellant's contention that there was no requirement to submit endorsed invoices with monthly returns was rejected, leading to the dismissal of the appeal.

In conclusion, the Tribunal upheld the decision to deny the Cenvat Credit to the appellants based on endorsed invoices, citing Rule 9 of the Cenvat Credit Rules and the withdrawal of the Simplified Textile Scheme in 2004. The limitation period for filing the appeal was deemed valid, and the appeal was rejected accordingly.