2018 (6) TMI 783 - AT - Central Excise

CENVAT credit - Rule 4(1) of CCR - entitlement of credit after crossing the SSI Exemption limit - Revenue entertained a view that inasmuch as Rule 4(1) allowed availment of credit only within a period of six months from the date of issuance of the documents, the appellants were not entitled to avail the credit on the basis of more than six months old bills of entry - Principles of harmonious construction and interpretation of rule - Held that - Admittedly, the appellants were not in a position to avail the credit immediately on receipt of the goods or within a period of six months from the issuance of bills of entry, as long as they were working under the small scale exemption notification. Their right to avail the credit would arise only on crossing the exemption limit. Such right specifically stands extended to them by the provisions of Rule 3(2) of the Cenvat Credit Rules and cannot be extinguished by making reference to Rule 4(1). It is also well settled principle of interpretation that a particular provision of law should not be interpreted in a manner so as to render the other provision as inapplicable or ineffective. Substantive right provided under the law cannot be denied by referring to other provision, if such substantive right is otherwise available to an assessee. By adopting the principles of harmonious construction and interpretation of rule, the appellant right to avail the credit at the time of coming out of the exemption scheme cannot be curtailed down by adopting Rule 4(1) of the Cenvat Credit Rules - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Rule 3(2) and Rule 4(1) of the Cenvat Credit Rules, 2004 regarding availment of credit on inputs; Entitlement of the appellant to avail credit on inputs lying in stock after crossing the exemption limit; Applicability of the six-month time limit under Rule 4(1) for availing credit.

Analysis:

The judgment by the Appellate Tribunal CESTAT NEW DELHI involved the interpretation of Rule 3(2) and Rule 4(1) of the Cenvat Credit Rules, 2004 concerning the availment of credit on inputs by the appellant, who manufactured marble slabs out of imported marble slabs. The appellant crossed the exemption limit in February 2015, becoming entitled to avail Cenvat credit of duty paid on inputs in stock. The dispute arose when the Revenue contended that the appellant could not avail credit on inputs based on bills of entry more than six months old, as per Rule 4(1). The original adjudicating authority and Commissioner (Appeals) upheld the denial of credit, leading to the present appeals.

The appellate authority rejected the appellant's argument that Rule 3(2) entitled them to avail credit irrespective of Rule 4(1) limitations. The authority emphasized that if Rule 4(1) specifically disallows credit on certain goods or services, it cannot be allowed under Rule 3. The appellant's reliance on case laws was deemed irrelevant as both rules could be applied simultaneously, according to the authority.

After hearing both sides, the Tribunal acknowledged the appellant's entitlement to credit under Rule 3(2) upon crossing the exemption limit, with no dispute on the quantity of inputs in stock. The only contention was the Revenue's objection under Rule 4(1) limiting credit availment to six months from document issuance. The Tribunal highlighted that upholding the Revenue's objection would render Rule 3(2) ineffective, as the appellant could only avail credit upon crossing the exemption limit. A harmonious interpretation of both rules was necessary to prevent one provision from making the other redundant.

The Tribunal emphasized that the appellant's substantive right to credit could not be denied by reference to Rule 4(1) if available under Rule 3(2). Refusing credit based on the six-month limit would unfairly curtail the appellant's right upon exiting the exemption scheme. By applying principles of harmonious construction and interpretation, the Tribunal set aside the impugned orders and allowed both appeals, providing consequential relief to the appellant. The judgment was pronounced on 1st June 2018.