2018 (8) TMI 414 - AT - Central Excise

SSI Exemption - N/N. 8/2003- CE dated 01.03.2003 - CENVAT Credit - it was alleged that appellant have availed credit of duty and Service Tax paid on Input and Input Services and also availed the exemption benefit during the same period simultaneously - Held that - On close reading of Paragraph 2(iii) of the Notification it is clear that the manufacturers shall not avail the credit of duty on inputs under Rule 3 or Rule 11 of the Cenvat Credit Rules paid on inputs used in the manufacture of specified goods cleared for home consumption. Thus, the Submission of the Learned Counsel that the restriction is on inputs used in the manufacture of specified goods and no input service and capital goods is justified - the denial of the CENVAT Credit on inputs is justified. Penalty - Held that - It is a case of interpretation of the Notification and therefore, imposition of penalty is not warranted. The demand of CENVAT Credit on input along with interest is upheld - demand of CENVAT Credit on Input Service and penalty are set aside - appeal allowed in part.

Summary

Issues:
Violation of SSI Exemption under Notification No. 8/2003-CE dated 01.03.2003 leading to availing credit of duty and Service Tax on Input and Input Services simultaneously.

Analysis:
The appellant, engaged in manufacturing Pig Iron, availed SSI Exemption under Notification No. 8/2003-CE dated 01.03.2003. A Show Cause Notice alleged simultaneous availing of credit of duty and Service Tax on Input and Input Services. The Adjudicating authority confirmed a duty demand of &8377; 8,09,829/- along with interest and penalty equal to the duty amount. The Commissioner (Appeals) rejected the appeal, leading to the present appeal before the Tribunal.

The appellant's Advocate argued that credit was not claimed on inputs used in the manufacture of specified goods under the Notification. They claimed credit on inputs for manufacturing capital goods and input services without any restriction under the Notification. The Counsel referred to various Case Laws to support the argument.

The A.R. reiterated the Commissioner (Appeals)' findings, highlighting the relevant provisions of the Notification and Cenvat Credit Rules, 2004. Paragraph 2(iii) of the Notification restricts availing credit of duty on inputs used in the manufacture of specified goods cleared for home consumption. Rule 11(2) of the Cenvat Credit Rules, 2004 mandates payment equivalent to CENVAT Credit on inputs when opting for exemption, with any remaining balance lapsing and not available for duty payment.

Upon analyzing the Notification, it was clarified that the restriction is on inputs used in the manufacture of specified goods, not on input services or capital goods. The denial of CENVAT Credit on inputs used in capital goods and specified goods was justified based on the Notification's provisions.

The Tribunal rejected the appellant's argument that non-fulfillment of exemption conditions should only deny the exemption benefit, not CENVAT Credit, citing relevant Case Laws. The Tribunal upheld the demand for CENVAT Credit on inputs with interest, while setting aside the demand for CENVAT Credit on Input Service and penalty. The impugned Order was modified accordingly, with the appeal disposed of on 03-07-2018.