2018 (9) TMI 490 - AT - Central Excise

CENVAT Credit - Sulphur - It appears to Revenue that the use of Sulphur as input is not exclusively for manufacture of dutiable excisable goods - whether the appellant is required to pay an amount under Rule 6(3) of the Cenvat Credit Rules, 2004 on removal of items like maize husk, maize gluten, maize germ, which are unintended products in the manufacture of maize discharge? - Time Limitation. Held that - The present SCN by the Revenue is by way of change of opinion and as such, is hit by the limitation - So far as the demands for the current period 2015 16 is concerned, it is an admitted fact in the SCN that the appellant has reversed the proportionate credit on the input - Sulphur and other inputs and have reversed the proportionate credit on the basis of turnover of exempted goods and dutiable goods, which fact is not disputed and has been recorded in the SCN. The appellant has already reversed the proportionate amount under Rule 6(3)(2) of the CCR, they are not required to reverse the CENVAT credit - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of Rule 6(3) of the Cenvat Credit Rule, 2004
- Applicability of amendments in Rule 6 post-March 2015
- Invocation of extended period for show cause notice

Interpretation of Rule 6(3) of the Cenvat Credit Rule, 2004:
The primary issue in this appeal revolved around whether the appellant was obligated to pay an amount under Rule 6(3) of the Cenvat Credit Rule, 2004 concerning unintended by-products like maize husk, maize gluten, and maize germ arising during the manufacture of maize discharge. The appellant argued that the input, Sulphur, was not intended for the production of these by-products and hence, they were not required to reverse any amount under Rule 6(3) of CCR 2004. The dispute arose due to an audit objection regarding the irregular availment of Cenvat credit on Sulphur during the manufacturing process.

Applicability of amendments in Rule 6 post-March 2015:
Subsequent to the initial objection, amendments were made to Rule 6 of the Cenvat Credit Rules effective from March 1, 2015, introducing Explanation 1 and 2. These explanations clarified that non-excisable goods cleared for consideration from the factory should be treated as exempted goods for the purpose of credit reversal. A circular issued by CBEC further emphasized the treatment of non-excisable goods like bye-products or waste as exempted goods, necessitating the reversal of credit of inputs and input services under Rule 6 of the Cenvat Credit Rules 2004. The Revenue, post-amendment, issued a show cause notice for an extended period from November 2011 to March 2016 based on these changes.

Invocation of extended period for show cause notice:
The appellant contended that the show cause notice issued beyond the normal period was a change of opinion and thus barred by limitation. Citing a Supreme Court ruling, the appellant argued that the notice was hit by the limitation period as the extended period was not applicable under the circumstances. In contrast, the Revenue defended the extended period invocation, asserting that the notice stemmed from action by the Preventive Wing, rendering the earlier Audit Wing's actions irrelevant. Ultimately, the Tribunal found in favor of the appellant, ruling that the show cause notice was indeed hit by the limitation period due to being a change of opinion. Additionally, since the appellant had already reversed the proportionate credit on inputs for the current period as per Rule 6(3)(2) of the CCR, they were not obliged to reverse the Cenvat credit.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and granting the appellant consequential benefits as per the law.