2009 (4) TMI 149 - AT - Central Excise

Cenvat Credit belated availment of credit - only ground on which the Commissioner had denied the credit taken by the applicants is that the inputs in question were received during the period from April, 2004 to September, 2006, but the credit was taken on 30.10.2006 and 31.11.2006 held that - The Single Member Bench in the case of J.V. Strips v. CCE (2007 (7) TMI 116 - CESTAT, NEW DELHI) has tried to interpret the term immediately on receipt of the inputs as appearing in the provisions of Rule 4(1) to mean that the credit should be taken within reasonable time excluding the avoidable delay. The Rule does not provide for denial of credit if the credit has been taken not immediately as interpreted in the aforesaid decision. In fact, the Circular issued by CBEC specifically states that such interpretation as arrived at in the impugned Order based on the aforesaid decision of the CESTAT, is not tenable. In other words, the Circular issued by the Board specifically states that even if the manufacturer does not take credit as soon as the inputs are received, credit cannot be denied for that reason alone

Summary

Issues:
- Denial of Cenvat credit on inputs due to delay in taking credit after receipt in the factory.

Analysis:
The Appellate Tribunal CESTAT, Mumbai, addressed a stay petition filed against an Order-in-Original confirming a demand of Rs. 4,45,65,219/- with interest and penalty of Rs. 1,10,00,000/- on the grounds of delayed credit availing. The Commissioner denied the credit based on the delay in taking credit on inputs received between April 2004 to September 2006, but claimed on 30-10-2006 and 31-11-2006. The issue revolved around the interpretation of Rule 4(1) of the Cenvat Credit Rules, 2004, specifically the term "immediately" for taking credit upon input receipt in the factory.

The Tribunal examined the CBEC's clarification that "immediately" allows the manufacturer to take credit at the earliest opportunity after input receipt, without specifying a strict time limit. It referenced precedents like Philips India Ltd. case, emphasizing that the Rules did not impose a time limit for availing credit. Additionally, the Essar Steels Ltd. case highlighted that the Rules did not prescribe an uppermost time limit for credit availing, reinforcing the interpretation that delay does not automatically warrant credit denial.

Further, the Tribunal cited the Coromandel Fertilizers Ltd. case, emphasizing that while the Rule mentions taking credit immediately, it does not set an outer time limit, and the absence of a prescribed time limit should not be implied. The Tribunal also contrasted a Single Member Bench decision with Two Member Bench decisions, noting discrepancies in interpreting the term 'immediately on receipt of the inputs' and the denial of credit based on avoidable delays.

Ultimately, the Tribunal found the denial of credit based on the delay in availing credit untenable, aligning with the CBEC's Circular that credit cannot be denied solely due to delayed credit taking. Consequently, the Tribunal granted a complete waiver of the pre-deposit of the duty demanded and the penalty imposed, staying recovery pending appeal disposal.