2017 (5) TMI 1292 - AT - Central Excise

CENVAT credit - inputs - molasses - credit is sought to be denied alleging that the documents on which credit is availed is not proper - Held that - 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, Grounds of limitation

Analysis:
1. Disallowance of CENVAT Credit on Inputs:
The appeal was filed against the disallowance of CENVAT credit on inputs availed by the manufacturers of Ferro alloys. The dispute arose when the supplier, Imcola, who had procured molasses for export but could not do so, obtained permission to clear the goods in the domestic market on payment of duty. The appellant availed credit based on documents like an invoice from Imcola and a challan evidencing duty payment. The Department objected, stating the documents were not specified in Rule 9 of CENVAT Credit Rules, 2004, and Imcola was not a registered supplier. The original authority and Commissioner(Appeals) upheld the demand. The appellant argued that the duty was paid, and the inputs were used in their final product, and the show-cause notice for disallowance was issued beyond the limitation period. The appellant cited relevant case laws to support their claim that procedural irregularities should not deny substantial CENVAT credit benefits.

2. Grounds of Limitation:
The appellant contended that the show-cause notice issued in 2011, invoking the extended period of limitation, was time-barred as they had disclosed the credit availed in their returns and documents. The appellant maintained that there was no intent to evade duty payment as the nature of credit availed was clearly mentioned. The Tribunal analyzed the facts and held that the appellant had not suppressed any material information, and therefore, succeeded on the ground of limitation as well.

In the judgment, the Tribunal emphasized that the purpose of Rule 9 of CENVAT Credit Rules, 2004, is to verify duty payment and ensure uniformity in availing credit. It was noted that while the rule specifies documents, it cannot cover all transaction types. The Tribunal referenced various judgments where procedural irregularities did not justify denying CENVAT credit, emphasizing the substantial benefit of such credit. Ultimately, since duty payment and input utilization were not in dispute, the denial of credit based on a procedural defect was deemed unjustified. The impugned order disallowing the credit was set aside, and the appeal was allowed with consequential reliefs, if any.