2016 (2) TMI 359 - AT - Central Excise

Cenvat Credit - duty paying document - endorsed Bill of Entry - Extended period of limitation - Held that - credit taken on the basis of endorsed bills of entry was correctly taken by the appellants. So for as the applicability of extended period is concerned it is observed that appellants were taking credit on the basis of documents which were submitted to the department for defacement. In the light of existing factual matrix it can not be said that there was any intention on the part of the appellants to evade payment of duty. Further conflicting judgments were being given on this issue by various courts. Accordingly we are of the opinion that extended period can not be invoked in the present proceedings and no penalties are imposable upon the appellants.

Summary

Issues Involved:

1. Admissibility of Cenvat Credit on the basis of endorsed bills of entry.
2. Invocation of the extended period for demand under Section 11A.
3. Imposition of penalties under the Cenvat Credit Rules.

Detailed Analysis:

1. Admissibility of Cenvat Credit on the basis of endorsed bills of entry:

The core issue in these appeals is whether Cenvat Credit can be claimed based on endorsed bills of entry. The appellants argued that Indian Oil Blending Ltd (IOBL), a subsidiary of Indian Oil Corporation Ltd (IOCL), merged with IOCL, and IOCL procured inputs from both indigenous and imported sources. The imported additives were controlled by IOCL's head office, and the bills of entry were filed by IOCL's marketing division. After paying the duty, these bills of entry were endorsed to IOCL, which then took Cenvat Credit. The appellants contended that the endorsement on the bills of entry was merely procedural and did not invalidate the document for taking credit. They cited Rule-57G of the Central Excise Rules, 1944, Rule-7 of the Cenvat Credit Rules, 2001/02, and Rule-9 of the Cenvat Credit Rules, 2004, which prescribe a "bill of entry/triplicate copy of bill of entry" as the document for taking credit. They argued that the bill of entry remains valid even after endorsement and that the CBEC Circular No. 276/109/96-CX dated 26/11/1996 supports their claim. The appellants also referenced various judicial pronouncements, including CCE vs. Pepsi Foods Ltd [2010 (254) ELT 284 (P&H)] and Vimal Enterprise vs. UOI [2006 (195) ELT 267 (Guj)], to support their argument that procedural lapses should not deny Cenvat Credit.

The Revenue, on the other hand, argued that with effect from 01/09/1996, CBEC had no power to specify any other document for taking Cenvat Credit under Rule-57G of the Central Excise Rules, 1944, and that endorsed bills of entry were not valid documents for taking credit. They cited various case laws, including CCE Chandigarh vs. Karam Chand Appliance [2009 (238) ELT 706 (HP)] and CCE vs. Speetra Electronics [2009 (235) ELT 795 (H.P)], to support their argument that the prescribed procedure for taking credit is mandatory.

The tribunal concluded that there is no difference between a bill of entry and an endorsed bill of entry, as the endorsement merely amends the consignee's name. The tribunal relied on the Bombay High Court's judgment in Maramgoa Steel Ltd vs. UOI [2005 (192) ELT 82 (Bom)], affirmed by the Supreme Court [2008 (229) ELT 481 (SC)], which held that the receipt of inputs and their use in the manufacture of dutiable finished goods is more important than the endorsement on the bill of entry. The tribunal also referenced CESTAT Delhi's judgments in Bando India (P) Ltd vs. CCE Delhi-III [2010 (262) ELT 1103 (Tri-Del)] and Sono Koya Steering Systems Ltd vs. CCE Delhi-III Gurgaon [2013 (296) ELT 481 (Tri-Del)], which supported the admissibility of credit on endorsed bills of entry.

2. Invocation of the extended period for demand under Section 11A:

The appellants argued that the demand under the show cause notice dated 25/03/1999, amounting to Rs. 5,14,10,914.84 for the period March 1997 to August 1998, is partly time-barred as the extended period under Section 11A cannot be invoked. They contended that all relevant endorsed bills of entry were submitted to the department for defacing, and the monthly statutory returns were verified and assessed by the jurisdictional authorities. They also cited conflicting judgments on this issue, arguing that there was no intention to evade duty.

The tribunal agreed with the appellants, noting that the documents were submitted for defacement and that conflicting judgments existed on this issue. Therefore, the extended period could not be invoked, and no penalties were imposable.

3. Imposition of penalties under the Cenvat Credit Rules:

The appellants argued that no penalties could be imposed under the Cenvat Credit Rules prevailing at the relevant time, as there was no intention to evade payment of duty or knowingly take wrong credits. The tribunal concurred, stating that there was no intention to evade duty, and conflicting judgments existed on this issue.

Conclusion:

The tribunal allowed the appeals by way of remand to the adjudicating authority for limited verification of the receipt of entire consignments and their utilization in the manufacture of dutiable finished goods. The adjudicating authority was instructed to grant a personal hearing to the appellants and allow them to produce all relevant records to justify their claims.