2017 (6) TMI 312 - AT - Central Excise

Utilization of CENVAT credit - benefit of N/N. 30/2004 - Rule 3(4) of the CCR - denial of utilization of credit on the ground that since the appellant had opted out of the CENVAT credit scheme, the credits of CENVAT lying unutilized shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for exports - Held that - by going through the N/N. 30/2004, there is no provision for lapsing of credit. Even when goods in question were being exported, there is clear provision under CENVAT Credit Rules 2004 that Rule 6 is not applicable for exports - the impugned order has been passed on the basis of N/N. 30/2004 wherein there is a restriction on availment of cenvat credit on inputs or capital goods but subsequently vide corrigendum 334/3/2004 dated 09.07.2004, the corrigendum was issued by which the restriction was only on inputs and not on capital goods which means that the cenvat credit on capital goods is permissible under the said notification - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availing irregular credit on capital goods after opting out of cenvat scheme
- Irregular utilization of cenvat credit towards payment of duty on inputs
- Interpretation of Notification No. 30/2004 CE dated 09.07.2004
- Applicability of Rule 6 of Cenvat Credit Rules 2004 for exports
- Time-bar for invoking extended period of limitation

Analysis:

Issue 1: Availing irregular credit on capital goods after opting out of cenvat scheme
The appellant opted for exemption under Notification No. 30/2004 CE dated 09.07.2004, which required not availing cenvat credit on inputs or capital goods. However, it was found that the appellant availed and utilized cenvat credit on capital goods after opting out of the scheme. The Department issued a show-cause notice for irregular credit availed and utilized, leading to confirmation of demand and imposition of penalty by the adjudicating authority. The Commissioner upheld this decision, stating that credits of cenvat lying unutilized shall lapse after opting out. The appellant argued that there was no provision for lapsing of credit under the notification and cited a corrigendum allowing credit on capital goods. The Tribunal found in favor of the appellant, highlighting the corrigendum and lack of provision for lapsing credit, setting aside the impugned order.

Issue 2: Irregular utilization of cenvat credit towards payment of duty on inputs
The show-cause notice also alleged irregular utilization of cenvat credit towards payment of duty on inputs. The appellant contested this, stating that the credit was used for payment of past liability, not final products. The Tribunal noted the confusion in the notice and ruled in favor of the appellant, emphasizing the need for proper consideration of facts and eligibility of credit for past liabilities based on relevant legal provisions and precedents.

Issue 3: Interpretation of Notification No. 30/2004 CE dated 09.07.2004
The appellant argued that the impugned order misinterpreted the notification and failed to consider a corrigendum issued on the same day, clarifying the restriction on credit for inputs only, not capital goods. The Tribunal agreed with this interpretation, emphasizing the importance of considering all relevant legal provisions and amendments to arrive at a just decision.

Issue 4: Applicability of Rule 6 of Cenvat Credit Rules 2004 for exports
The Tribunal highlighted that Rule 6 of the Cenvat Credit Rules 2004 is not applicable for exports, further supporting the appellant's case regarding the permissibility of credit on capital goods under the notification. This clarification reinforced the Tribunal's decision to set aside the impugned order.

Issue 5: Time-bar for invoking extended period of limitation
The appellant argued that the demand was not sustainable, invoking a bona fide belief based on the notification. They contended that the extended period of limitation should not be applied due to this belief. The Tribunal did not delve deeply into this issue as the primary grounds for setting aside the order were related to the interpretation of the notification and relevant legal provisions.

In conclusion, the Tribunal allowed the appeal of the appellant, emphasizing the correct interpretation of the notification, absence of provision for lapsing credit, and the permissible utilization of credit for past liabilities. The decision underlines the importance of thorough consideration of legal provisions and amendments in adjudicating such matters.