2018 (9) TMI 1440 - HC - Central Excise

CENVAT Credit - Capital goods - availment of 50% credit in subsequent year - Whether in the facts and circumstances of case and in law, the Tribunal ought to have held that the Cenvat Credit on 50% value of CI Moulds is available in the subsequent Financial Year under Rule 4(2) (b) of the Cenvat Credit Rules 2002? - Whether in the facts and circumstances of the case and in law, the Tribunal was justified in holding that the amendment made to Rule 4(2)(b) of the Cenvat Credit Rules 2002 by the Cenvat Credit (18th Amendment Rules 2003) i.e. Notification No.70 of 2003 Central Excise (M.T.) dated 15th September, 2003, are not retrospective and/or clarificatory in nature? - substantial question of law. Held that - The Notification No.70/2003 very clearly makes it effective only from 15th September, 2003. Thus, it is prospective. Further, the Circular No.755 dated 13th October, 2003 issued by the Central Board of Excise and Customs also does not state that it is clarificatory or for removal of doubts. Thus, its benefit cannot be extended to availment of credit prior to 15th September, 2003 - the above-mentioned two questions, do not give rise to any substantial question of law in view of self evident position - the questions not admitted for consideration. Whether in the facts and circumstances of the case and in law, the Tribunal was justified in upholding the penalty of ₹ 2,00,000/- under the Cenvat Credit Rules, 2005? - Held that - Nothing has been shown in the present facts which would justify imposition of penalty. Nor any reason has been shown for the Tribunal not to follow the decision of its Coordinate Bench in Sri Krishnan Alloys 2015 (7) TMI 1148 - MADRAS HIGH COURT in the present facts, wherein the Court held that on similar facts, the Assesse therein had acted on the bona fide belief that he is entitled to take balance credit in the subsequent Assessment Year - penalty not warranted - decided in favor of assessee. Appeal disposed off.

Summary

Issues:
1. Availability of Cenvat Credit on CI Moulds in subsequent financial year under Rule 4(2)(b) of Cenvat Credit Rules 2002.
2. Retrospective nature of the amendment made to Rule 4(2)(b) of Cenvat Credit Rules 2002 by Notification No.70 of 2003 Central Excise.
3. Justification of upholding penalty under Cenvat Credit Rules 2005.

Issue 1: Availability of Cenvat Credit on CI Moulds in subsequent financial year under Rule 4(2)(b) of Cenvat Credit Rules 2002:
The Appellant, a manufacturer of M.S. Ingots, availed Cenvat Credit on CI Moulds in two parts - 50% in 2001-02 and the remaining 50% in 2002-03. A show cause notice challenged the Appellant's entitlement to the balance 50% credit in 2002-03, citing Rule 4(2)(b) of Cenvat Credit Rules 2002. The Appellant argued that CI Moulds were parts/accessories, exempting them from the possession requirement. The Tribunal, Commissioner, and the High Court rejected the appeal, deeming the possession and use condition necessary before the amendment in 2003. The Appellant's argument for retrospective application of the amendment was dismissed, citing the Notification's prospective nature effective from September 2003.

Issue 2: Retrospective nature of the amendment to Rule 4(2)(b) of Cenvat Credit Rules 2002:
The Appellant contended that the amendment to Rule 4(2)(b) by Notification No.70 of 2003 was clarificatory and retrospective, warranting the benefit extension. However, the Revenue argued that the Tribunal's reliance on a previous decision upheld by the Madras High Court settled the matter against the Appellant. The High Court concurred, emphasizing the prospective effect of the Notification and the absence of clarificatory intent in the Circular. The Court found no substantial legal question in the Appellant's argument, aligning with the Madras High Court's view on the issue.

Issue 3: Justification of upholding penalty under Cenvat Credit Rules 2005:
The Appellant's penalty under Rule 13 of Cenvat Credit Rules 2002 was upheld by the Tribunal, following a previous decision. However, the High Court found no justification for the penalty imposition in the present case, noting the absence of grounds for penalty imposition and the Tribunal's inconsistency in not following a decision deleting penalty in a similar case. Consequently, the High Court ruled in favor of the Appellant, answering Issue 3 negatively and disposing of the appeal accordingly, without costs.

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