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2017 (12) TMI 1875 - AT - Central ExciseCENVAT Credit - primary argument of UniDeritend Ltd. is that the credit was available to them prior to amendment in Rule 7(d) of the Cenvat Credit Rules 2004 and therefore they cannot be asked to follow the said Rule 7(d) - Penalty - HELD THAT - In the instant case while the invoices were raised prior to the amendment there is no evidence if the payment was made prior to the amendment. Thus if the credit was available prior to the amendment is also a doubtful proposition. In any case UniDeritend Ltd. has availed the credit of duty paid by them after the amendment and thus the law as it existed at the time when they converted the duty paid by them into cenvat credit would be the law applicable to the said credit. Since at the time of availing cenvat credit sub-rule (d) of Rule 7 and Explanation 3 of the said rule was in existence at the time of availing credit UniDeritend Ltd. was required to follow the same and avail the credit only in terms of Rule 7(d) read with Explanation 3. In these circumstances the demand of reversal of credit is upheld. Penalty - HELD THAT - The plain language of the Rule is very clear and leaves no scope for doubt. Under these circumstances imposition of penalty is justifiable. Appeal of UniDeritend Ltd. is dismissed and appeal of Revenue is allowed.
Issues:
1. Distribution of Cenvat credit of input services among multiple units. 2. Interpretation of Rule 7(d) of the Cenvat Credit Rules. 3. Applicability of penalty under Section 11AC of the Central Excise Act. Issue 1: Distribution of Cenvat credit of input services among multiple units: The case involved appeals by both the Revenue and M/s. UniDeritend Ltd. against the Commissioner (Appeals) order. UniDeritend Ltd. argued that they had units at different locations and had availed Cenvat credit of common input services only at one unit, leading to a demand notice. They contended that the credit accrued before the amendment to Rule 7(d) of the Cenvat Credit Rules, allowing them to distribute the credit as per the rules existing before the amendment. UniDeritend Ltd. emphasized that there was no intention to evade duty as the entire credit was available to all three units, and they could not have gained anything by availing credit in just one unit. The invoices for the services showed they were raised before the amendment, but there was no verification of payment dates. UniDeritend Ltd. argued that their right to distribute credit arose when the credit became available to them, citing a Supreme Court decision and Section 38A of the Central Excise Act. Issue 2: Interpretation of Rule 7(d) of the Cenvat Credit Rules: The Tribunal noted that Rule 7(d) and Explanation 3 were inserted in the Cenvat Credit Rules on 1.4.2014, allowing distribution of Cenvat credit among units based on turnover. The Tribunal clarified that duty paid by an assessee does not automatically become Cenvat credit; it must be claimed in the account and returns as Cenvat credit. While UniDeritend Ltd. claimed the credit after the amendment, the law applicable at the time of availing the credit was to be followed. As Rule 7(d) and Explanation 3 were in existence when the credit was availed, UniDeritend Ltd. was required to adhere to these provisions. Consequently, the demand for reversal of credit was upheld. Issue 3: Applicability of penalty under Section 11AC of the Central Excise Act: Regarding the penalty, Revenue argued that since the demand of duty was upheld, the mandatory penal provisions under Section 11AC applied. Revenue contended that Rule 7(d) was clear, leaving no room for interpretation. The Tribunal agreed with Revenue, stating that the rule was unambiguous, and UniDeritend Ltd.'s argument lacked merit. The imposition of the penalty was deemed justifiable due to the clear language of the rule. Consequently, UniDeritend Ltd.'s appeal was dismissed, and Revenue's appeal was allowed. In conclusion, the Tribunal upheld the demand for reversal of credit and imposed a penalty under Section 11AC, emphasizing the importance of adhering to the clear provisions of the law, especially in matters of Cenvat credit distribution and penalty applicability.
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