2017 (12) TMI 1090 - AT - Central Excise

CENVAT credit - Rule 3(4A)(a) of the CCR, 2002 - credit is reversed while clearing the goods on commercial invoice - Held that - Legislature has provided the rule keeping all the factors in mind. Any interpretation which makes part of the text of law for otios cannot be considered a proper interpretation - the interpretation that reversing the credit amounts to not taking credit at all would make proviso to Rule 3(4A)(a) of Cenvat Credit Rules, 2002 otios. In these circumstances such interpretation cannot be accepted. Revenue neutrality - Held that - Once the option to pay tax on the transaction value for certain goods is allowed it is possible that goods may be sold at a loss and therefore duty paid in respect of such goods can be less than the credit taken by the appellant. The proviso to the sub rule has been introduced to take care of such situation. It is possible for a dealer to misuse the rule by making the sale of loss making goods against the Cenvatable invoice and profit making goods by reversal of credit. In those circumstances there will be revenue loss. Appeal dismissed - decided against appellant.

Summary

Issues:
Demand of Cenvat Credit under Rule 3(4A)(a) of the Cenvat Credit Rules, 2002.

Analysis:
The appellant, a dealer in excisable goods, appealed against a demand for Cenvat Credit under Rule 3(4A)(a) of the Cenvat Credit Rules, 2002. The appellant cleared textile fabrics under this rule for consignments sold as cenvatable goods, while other consignments were cleared as commercial sales with reversed Cenvat credit. The Tribunal remanded the matter to the Commissioner(Appeals) previously, and in the subsequent proceedings, the demand of duty was upheld. The appellant argued that they followed the provisions of the rule whenever issuing cenvatable invoices and that they did not withdraw the option exercised for clearances under the rule. They contended that the impugned order did not address the issue of legality of clearance of goods and the concept of a "deemed manufacturer." The appellant relied on a Supreme Court decision to support their argument that once credit is reversed, it is as if the credit was not taken. However, the Tribunal found that such an interpretation would render a part of the rule meaningless and that the legislature crafted the rule considering all factors. The Tribunal also noted that allowing the appellant's plea could lead to revenue loss by enabling the sale of loss-making goods against Cenvatable invoices and profit-making goods by reversing credit, resulting in loss to government revenue. Therefore, the appeal was dismissed.

In conclusion, the Tribunal upheld the demand for Cenvat Credit under Rule 3(4A)(a) of the Cenvat Credit Rules, 2002, finding that the appellant's interpretation would not align with the legislative intent and could lead to potential revenue loss. The Tribunal emphasized the importance of maintaining the integrity of the tax system and ensuring that dealers do not exploit provisions for personal gain at the expense of government revenue.