2017 (1) TMI 593 - AT - Central Excise

Restoration of credit - The refund claim was rejected as the credit was not within the entitlement of the appellant for having been availed long after the receipt of the inputs within the factory of appellant - Held that - The Rules do not prescribe any outer limit for availment but they do insist upon taking of credit on inputs only after receipt in factory i.e. it cannot be availed on the strength of a paper trail but on physical arrival at the factory. As long as that condition has been fulfilled there can be no cavil on availment. Capital goods must similarly be received and the full credit was not to be availed in the first year; to the extent that appellant has not availed of the credit in the first year there can be no cavil again on lumpsum availment beyond the first year. Reliance placed in the case of COROMANDEL FERTILIZERS LTD. Versus COMMR. OF C. EX. (A) VISAKHAPATNAM-IV 2008 (8) TMI 333 - CESTAT BANGALORE where it was held that there was sufficient reasons for the appellants for not taking credit during the relevant period in view of the Uncertainty in the matter. When the law is settled on the issue there is no justification to deny the credit on the ground that it is availed after a long time. Appeal is allowed by restoring of credit - decided in favor of appellant.

Summary

Issues:
Refund claim rejection based on delayed credit availed by the appellant.

Analysis:
The appellant, M/s Precision Metal Products Pvt Ltd, filed a refund claim of ?9,27,776 before the Assistant Commissioner of Central Excise, Kandivali Division, which was rejected by the authority. The appellant had imported capital goods and inputs between 2006-07 to 2010-11 but had not availed the credit of special additional duty (SAD) paid due to ignorance. The appellant eventually reversed the credit on advice from Central Excise authorities. A show cause notice was issued alleging subterfuge in the refund claim process. The refund claim was rejected as the credit was not availed immediately upon receipt of inputs within the factory. The appellant sought restoration of the credit, arguing that the Rules do not prescribe an outer limit for availment of credit. The lower authorities erred in denying restoration of credit, and the appellate tribunal allowed the appeal by restoring the credit amount.

The show cause notice issued had unusual proposals and insinuations, questioning the appellant's refund claim process. The notice alleged that the appellant wrongly availed credit and reversed it to avoid penal action, leading to the refund claim. The notice lacked clarity on the provision applicable to the refund claim. The appellant admitted to the credit taken on SAD paid for capital goods and inputs over five years but had not utilized the credit. The original authority and first appellate authority failed to note that the appellant sought approval for restoration of the credit taken and reversed. The appellant argued for restoration of credit, while the Authorized Representative opposed it. The tribunal found the interpretation of lower authorities erroneous, stating that as long as the conditions for credit availment are fulfilled, there should be no issue with the availment process.

The Central Board of Excise & Customs clarified that there is no specific time limit for availing CENVAT credit on inputs in the factory. The tribunal referred to a previous case involving the entitlement of credit on fuel, emphasizing that no outer time limit is prescribed for credit availment. The tribunal cited various cases where the absence of a time limit for credit availment led to the allowance of credit even after a significant period. The decisions cited by the Authorized Representative regarding unjust enrichment were deemed irrelevant as no refund in cash was at issue in this dispute. The tribunal allowed the appeal by restoring the credit of ?9,27,776, as the original and appellate authorities erred in denying the restoration of credit to the appellant.