2016 (3) TMI 345 - AT - Central Excise

Disallowance of CENVAT credit - appellant is engaged in the manufacture of Textile Articles, classifiable under Chapter 58 and 60 of the Schedule to the Central Excise Tariff Act, 1985 - whether the appellant has rightly taken CENVAT credit on the inputs received from 100% EOU, during the period 2006-07 to 2009 (i.e. August 2009) - Held that - Denial of Cenvat Credit is related to calculation error, which the appellant has already paid alongwith interest and imposition of penalty is not justifiable. - Decided in favour of assessee

Summary

Issues Involved:
- Disallowance of CENVAT credit
- Calculation error in CENVAT credit
- Applicability of Rule 3(7) of Cenvat Credit Rules
- Retrospective application of amendments
- Judicial precedents on CENVAT credit from 100% EOU
- Denial of CENVAT credit and imposition of penalty

Analysis:

1. Disallowance of CENVAT Credit:
The appellant, engaged in the manufacture of Textile Articles, faced disallowance of CENVAT credit amounting to Rs. 12,01,233/- along with interest and a penalty for the period from 01.4.2006 to 06.9.2009. The issue revolved around whether the appellant rightfully took CENVAT credit on inputs received from a 100% EOU during the mentioned period.

2. Calculation Error in CENVAT Credit:
The appellant acknowledged a calculation error in the demand of CENVAT credit amounting to Rs. 4,61,879/-. They had already debited this amount along with interest, indicating their willingness to rectify the error. The penal provisions were contested, arguing that the balance demand was not sustainable.

3. Applicability of Rule 3(7) of Cenvat Credit Rules:
The crux of the matter lay in the interpretation of Rule 3(7) of the Cenvat Credit Rules. The Revenue contended that the appellant could avail credit on the Additional duty leviable under Section 3(1) of the Customs Tariff Act, equal to the duty of excise under Section 3(1)(a) of the Central Excise Act, on or after 07.09.2009. The rule's provisions were examined to determine the eligibility of the appellant for CENVAT credit.

4. Retrospective Application of Amendments:
The debate extended to whether the amendments, specifically inserted in Rule 3(7) of the Cenvat Credit Rules, could be applied retrospectively. The Revenue argued that the decisions cited by the appellant did not account for the lack of express provisions for retrospective application in the said amendment.

5. Judicial Precedents on CENVAT Credit from 100% EOU:
The Tribunal referred to relevant judicial precedents, particularly the case of Metaclad Industries vs. CCE, Mumbai, to establish a legal standpoint. The decision emphasized the eligibility of CENVAT credit on duties paid by a 100% EOU. The Tribunal's consistent rulings on similar cases supported the appellant's claim for CENVAT credit.

6. Denial of CENVAT Credit and Imposition of Penalty:
Ultimately, the Tribunal found in favor of the appellant, citing precedents and legal interpretations. The demand for the balance amount of CENVAT credit, along with interest and penalties, was set aside. The denial of a specific amount of CENVAT credit due to a calculation error was upheld, with the appellant having already rectified the error and paid the necessary amount.

In conclusion, the judgment delved into the nuances of CENVAT credit eligibility, retrospective application of rules, and the significance of judicial precedents in resolving disputes related to taxation and excise duties.