2016 (4) TMI 191 - AT - Central Excise

CENVAT credit - inter unit transfer of credit - transferred by DT units, for clearance of the goods for home consumption - whether on 15.04.2004, three units would be considered as separate units and the transfer of credit from DT unit to the Assessee and utilisation of the said credit for clearance of the finished goods by the Assessee - Held that - Rule 3 of the Cenvat Credit Rules 2004 provides a manufacturer of final product shall be allowed to take cenvat credit of the duty paid on any excisable goods received in the factory or manufacturer of the final product. Sub-Rule (4) of Rule 3 of Rules 2004 provides the Cenvat Credit may be utilized for payment of any duty of excise on any final product. Thus, there is no one-to-one co-relation between the inputs and final product. The Assessee was holding a single registration certificate during the material period and they have rightly discharged duty liability for clearance of the goods for home consumption by utilising credit from Cenvat Account on inter-unit transfer of credit from DT Division to the Assessee, by a common pool. In any event, substantial benefit of the Assessee of utilisation of Cenvat Credit by a common pool cannot be denied by a technical infraction of provision of law, if any. In view of the above discussions, we hold that the assessee rightly utilized the Cenvat Credit transferred by DT units, for clearance of the goods for home consumption during the period April 2005 to Sept. 2009 as the Assessee was holding single registration certificate during the said material period. Accordingly, the demand of Cenvat Credit alongwith interest and penalties are set aside. The penalty imposed on Shri Deepak Prabhakar Marathe, General Manager and Authorised Signatory of the assessee, is also set aside. The appeals filed by the appellants are allowed. The application for extension of stay is dismissed as infructuous. - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the three divisions/units of the company should be considered as separate units from 15.04.2005 or from 23.09.2009.
2. The legality of the transfer and utilization of Cenvat Credit from the DT unit to the Assessee.
3. The applicability of the extended period of limitation for demanding duty.
4. The imposition of penalties on the Assessee and its authorized signatory.

Issue-wise Detailed Analysis:

1. Whether the three divisions/units of the company should be considered as separate units from 15.04.2005 or from 23.09.2009:
The Tribunal examined the sequence of events and orders from various authorities. Initially, the Deputy Commissioner had allowed a single Registration Certificate (R.C.) for the three units and permitted a consolidated Cenvat Account/PLA. This arrangement was modified on 24.01.2005, withdrawing the common PLA/Cenvat Account but maintaining a single R.C. The Assessee's request for separate R.C.s on 15.04.2005 was rejected, and subsequent appeals led to the Commissioner (Appeals) directing the issuance of separate R.C.s on 12.04.2005. However, these separate R.C.s were only issued on 23.09.2009. The Tribunal concluded that the three units should be considered separate only from 23.09.2009, as the issuance of separate R.C.s is the determining factor, not the date of application or the appellate order.

2. The legality of the transfer and utilization of Cenvat Credit from the DT unit to the Assessee:
The Tribunal noted that the Assessee maintained a single consolidated Cenvat Account/PLA for discharging duties, as per the directions in the Deputy Commissioner's orders until the issuance of separate R.C.s on 23.09.2009. The Tribunal emphasized that there is no one-to-one correlation required in the Cenvat Scheme between inputs and final products. Therefore, the transfer of Cenvat Credit from the DT unit to the Assessee and its utilization for duty payment was deemed regular and in compliance with the law during the period in question.

3. The applicability of the extended period of limitation for demanding duty:
The Tribunal found that the Department was fully aware of the Assessee's activities and the maintenance of a single consolidated Cenvat Account/PLA. There was no suppression of facts or intent to evade duty by the Assessee. Consequently, the extended period of limitation for demanding duty was not applicable in this case.

4. The imposition of penalties on the Assessee and its authorized signatory:
Given the Tribunal's findings that the Assessee's actions were in compliance with the directions of the Department and the law, the demand for Cenvat Credit along with interest and penalties was set aside. The penalty imposed on Shri Deepak Prabhakar Marathe, the General Manager and Authorized Signatory of the Assessee, was also set aside.

Conclusion:
The Tribunal allowed the appeals filed by the Assessee and its authorized signatory, setting aside the demand for Cenvat Credit, interest, and penalties. The application for the extension of stay was dismissed as infructuous. The judgment emphasized that the three units should be considered separate only from the date of issuance of separate R.C.s on 23.09.2009, and the Assessee's maintenance of a single consolidated Cenvat Account/PLA was lawful until that date.