2018 (8) TMI 1005 - AT - Central Excise

CENVAT Credit - duty paying documents - Rule 9(2) of CCR - credit prior to registration of premises - relevant date for issuance of SCN - Scope of SCN - Has the Commissioner traversed beyond the scope of Show Cause Notice? - Only allegations in the SCN was with receipt of non-eligibility of credit on account of availment of credit prior to registration of service centres - Commissioner confirmed the demand on the ground that the stock transfer notes issued by the appellants do not satisfy the requirements of proper documents to take credit Held that - It is clear that the Learned Commissioner has accepted the contention of the appellants as far as the admissibility of credit availed by them on the inputs available on the date of coming in to effect of the provisions of deemed manufacture. Further, the Learned Commissioner has also observed that there is no time limit prescribed under CENVAT Credit Rules for availment of Credit The authority further proceeded to decide the eligibility on the factors that were not the part of Show Cause Notice. To this extent, the L Commissioner has certainly traversed beyond the scope of the SCN - the impugned order is not maintainable. Whether the appellants are entitled for the credit they have availed? - Held that - The appellants being a well-established multinational have an elaborate and fool proof method of accounting goods. All the service centres receive parts only from CWH. It is not the case of the Department that parts are dispatched or sold from CWH to places other than service centres or that Service Centres procure parts from other sources. In such a case, it is incomprehensible as to how some parts could not be held to be not correlated to be duty paid. Having dealt the issue from the issue of substantial compliance, having held that the registration itself is a procedural requirement and stock transfer invoice a duty paying document the learned Commissioner could have got the issue examined in totality from CWH and further transfer to various service centres before denying the credit - the issue requires to go to the jurisdictional authority who shall allow the credit on verifying the records at CWH and transfer to various service centres in totality, within 3 months of submission of records and evidence to that effect by the appellants - appeal allowed by way of remand. Whether the appellants case is covered under the provisions of Section 11A (2B) of the Central Excise Act, 1944? - Held that - The audit note in fact has raised some issues relating to irregular availment of CENVAT Credit. The only condition under which the provision of this section could be denied to the appellants was non-payment of duty by reason of fraud collusion suppression of fact, wilful misstatement etc. These ingredients were not established either in the SCN or the impugned order. Moreover, the appellants appear to have submitted that consequent upon the change in legal position, they examined as to whether the activity undertaken by them at the CWH and Service Centres amounted to manufacture; simultaneously, the mammoth task of identifying the activity undertaken in respect of each of the 5-6000 number of parts was taken up and could be completed only by August 2006 - it was not open to the department to go beyond the proposition in the Audit Note. Appeal allowed by way of remand.

Issues Involved:
1. Whether the Commissioner traversed beyond the scope of the Show Cause Notice (SCN).
2. Whether the appellants are entitled to the credit they have availed.
3. Whether the appellants' case is covered under the provisions of Section 11A(2B) of the Central Excise Act, 1944.

Detailed Analysis:

1. Traversing Beyond the Scope of SCN:
The appellants argued that the SCN was issued on the ground of non-eligibility of credit due to availment prior to registration at service centers. However, the Commissioner confirmed the demands on different grounds, such as the inadequacy of stock transfer notes and lack of linkage between inputs and duty-paying documents. This was contended to be beyond the scope of the SCN.

The Tribunal found that the Commissioner had indeed accepted the appellants' contention regarding the admissibility of credit availed on inputs available on the date of the deemed manufacture provisions. The Commissioner also observed that there is no time limit prescribed under CENVAT Credit Rules for availment of credit. Despite this, the Commissioner proceeded to decide on eligibility based on factors not mentioned in the SCN, thus traversing beyond its scope. The Tribunal held that the impugned order is not maintainable as per the cited case laws.

2. Entitlement to Credit:
The appellants contended that they availed credit of the CVD paid at the time of import of parts lying in stock as on 01.06.2006, which was accepted by the department. The Commissioner, however, denied credit for parts available as on 01.06.2006 and for parts received at service centers during June and July 2006, citing the inability to link them to any duty-paying documents.

The Tribunal noted that the Commissioner had taken inconsistent stands for different periods. While the Commissioner accepted stock transfer invoices as valid documents for some periods, he denied credit for others, citing lack of correlation with duty-paying documents. The Tribunal found that the appellants, being a well-established multinational, likely had a robust accounting system. It was not the department's case that parts were dispatched to places other than service centers. The Tribunal held that the Commissioner could have examined the issue in totality from the Central Warehouse (CWH) and its transfers to service centers before denying credit. The issue was remanded to the jurisdictional authority for verification within three months.

3. Applicability of Section 11A(2B):
The appellants argued that the Central Excise Audit team had visited their premises and issued an audit note concluding that no further action was required as they had paid duty along with interest before the SCN. The Tribunal found that the department was aware of the credit availed and the duty payment by the appellants. The SCN and the impugned order did not establish fraud, collusion, suppression of facts, or willful misstatement. The appellants had voluntarily approached the authorities and informed them about the consequences of the amendments to Section 2(f)(iii). Therefore, it was not open to the department to go beyond the audit note's proposition.

Conclusion:
The Tribunal allowed the appeals by remanding the case to the jurisdictional authorities to allow credit after verifying the records and documents pertaining to the receipt, storage, and distribution of parts within three months of submission of necessary evidence by the appellants. The penalties imposed were set aside.

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