2016 (6) TMI 435 - AT - Central Excise

Recovery of differential duty - inputs cleared as such to other sister units by reversing the credit availed on such inputs, instead of discharging the duty on the value of the inputs at the time of its clearance from their factory to their sister units, as per Rule 3(4) of Cenvat Credit Rules, 2001/2002 - Held that - Undisputedly the appellant had cleared inputs on which CENVAT Credit was availed during the period June 2001 to February 2003 to their sister concerns. While clearing the said inputs, as such, they reversed the CENVAT credit availed on such inputs at the time of its receipt of the same at their premises. The Revenue objected to the said method alleging that as per Rule 3(4) of Cenvat Credit Rules, 2001/2002, the appellants were required to pay duty on the value of the said inputs. The adjudicating authority, however dropped the proceeding on the basis of amended provision which came in to force w.e.f 01.03.2003. We find that on an Appeal filed by the Revenue, the learned Commissioner (Appeals) after applying the correct position of law confirmed the demand against the appellant. We find that the adjudicating authority while deciding the show cause notice adopted the amended provision of Rule 3(4) of CCR,2001/2002 which came into force from 01.03.2003 instead of Rule 3(4) as was in existence during the relevant period June 2001 to February 2003. - Decided against assessee.

Summary

Issues:
1. Interpretation of Rule 3(4) of Cenvat Credit Rules, 2001/2002 regarding duty payment on cleared inputs.
2. Application of correct legal provisions during the relevant period.
3. Impact of the amended provision of Rule 3(4) from 01.03.2003 on the case.

Detailed Analysis:
1. The case involved the interpretation of Rule 3(4) of Cenvat Credit Rules, 2001/2002 concerning the duty payment on inputs cleared by the appellants to their sister units. The Revenue contended that duty should be paid on the value of inputs as per Section 4 of the Central Excise Act, 1944, supported by CBEC Circular No. 643/34/2002-CX. The Commissioner (Appeals) upheld the Revenue's appeal based on the correct legal position during the relevant time.

2. The appellate tribunal noted that the appellants had cleared inputs to their sister units by reversing the CENVAT credit availed on those inputs during the period from June 2001 to February 2003. The Revenue objected, citing Rule 3(4) of Cenvat Credit Rules, 2001/2002, which required duty payment on the value of inputs at the time of clearance. The adjudicating authority initially dropped the proceedings based on an amended provision effective from 01.03.2003. However, the Commissioner (Appeals) reversed this decision, confirming the demand against the appellants.

3. The tribunal highlighted the difference between the original Rule 3(4) in force during June 2001 to February 2003 and the amended provision effective from 01.03.2003. The original rule mandated duty payment based on the value of goods at the time of removal, while the amendment required payment equal to the credit availed on such inputs. The adjudicating authority mistakenly applied the amended provision in its decision, which was incorrect for the relevant period. Consequently, the tribunal upheld the Commissioner (Appeals)'s decision, dismissing the appeal by the appellants.