2017 (5) TMI 626 - AT - Central Excise

CENVAT credit - duty paying documents - inputs - molasses - denial on the ground that the documents are not specified in rule 9 of CCR, 2004 - Held that - Rule 9 of CCR, 2004 prescribes the documents on which credit can be availed - the purposed of this Rule is for verification whether duty is paid - the defects in the document on which credit is availed by appellant can be concluded to be a procedural irregularity and substantial benefit of CENVAT credit cannot be denied on account of this. Extended period of limitation - Held that - The appellant having availed credit on the duty paid and also having disclosed the nature of the credit availed in the ER1 returns, they cannot be saddled with suppression of facts with intent to evade payment of duty - the appellants succeed on the ground of limitation also. Appeal allowed - decided in favor of appellant.

Summary

Issues: Disallowance of CENVAT credit on inputs

Analysis:
1. The appeal was filed against the disallowance of CENVAT credit on inputs availed by the manufacturers of Ferro alloys. The dispute arose when the Department objected to the credit availed by the appellants, citing that the documents were not specified in rule 9 of CENVAT Credit Rules, 2004, and the supplier was not a registered supplier to pass on the credit under the rules.

2. The appellant argued that the supplier had obtained permission to clear unexported goods in the domestic market on payment of duty after being unable to export them. The appellant had utilized the inputs in their final product, and although the duty payment and utilization were not disputed, the Department objected to the document on which the credit was availed. The appellant contended that the show-cause notice issued was time-barred and that the credit should not be denied on technical grounds when there was no dispute about the receipt of goods and payment of duty.

3. The Department reiterated that Rule 9 of CENVAT Credit Rules prescribes the documents on which credit can be availed and the persons who can issue such documents. They argued that the appellant availed credit on documents not specified in the rule, as the invoice was issued by a merchant exporter, not a registered entity with the Central Excise Department.

4. The Tribunal analyzed the purpose of Rule 9, emphasizing that it aims to verify duty payment and provide uniformity in availing credit. Referring to past judgments, the Tribunal highlighted cases where credits were allowed based on documents not specifically listed in the rules, emphasizing that procedural irregularities should not deny substantial benefits of CENVAT credit. The Tribunal held that denial of credit based on a procedural defect was unjustified when duty payment and utilization were not in dispute.

5. Additionally, the Tribunal considered the ground of limitation, noting that the appellant had disclosed the credit availed in their returns and documents, making the show-cause notice issued after a significant delay time-barred. Consequently, the Tribunal set aside the impugned order disallowing the credit and allowed the appeal with consequential reliefs, if any.