2018 (11) TMI 356 - AT - Central Excise

CENVAT Credit - inputs which were subsequently cleared as such to their sister unit without reversal of credit - Rule 3(5) of Cenvat Credit Rules - time limitation - Held that - The appellant being the public sector undertaking cannot be saddled with any malafide suppression or mis-statement, with intent to evade the payment of duty. In any case the credit required to be reversed by the Appellant was available as credit to their sister units, who could be utilise the same for the payment of duty of excise. Thus leading to a Revenue neutral situation even after the subsequent obtaining of centralised registration, the appellant was paying the entire duty on behalf of the other units. In as much as and admittedly Revenue neutral situation is involved in the present appeal and the appellant is a PSU, the extended period is not invokable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant, a subsidiary of Coal India Ltd., correctly availed Cenvat Credit on inputs cleared to sister units without reversing the credit as required by Rule 3(5) of Cenvat Credit Rules, leading to the initiation of proceedings against them.
2. Whether the appellant's subsequent centralised registration and common return filing for all units justifies the non-reversal of credit and establishes a revenue-neutral situation, thereby negating the need for invoking the extended period of limitation.
3. Whether the doctrine of Revenue neutrality applies in the appellant's case, considering the utilization of excess credit by sister units for excise duty payment, leading to a situation where the appellant was paying duty on behalf of other units.

Analysis:

1. The appellant, a 100% subsidiary of Coal India Ltd., faced proceedings for not reversing Cenvat Credit on inputs cleared to sister units as required by Rule 3(5) of Cenvat Credit Rules. The Commissioner confirmed the demand, which was challenged before the Tribunal.

2. The appellant argued that post-centralised registration and common return filing, any duty required was available as credit to sister units, resulting in a revenue-neutral scenario. The appellant's status as a public sector undertaking was highlighted to negate any malafide intent, justifying non-invocation of the extended period of limitation.

3. The Revenue contended that the appellant violated the law by not reversing excess credit on inputs, supporting the impugned order. However, the Tribunal found that the appellant's actions led to a revenue-neutral situation, with the excess credit utilized by sister units for excise duty payment, thereby absolving the appellant of any malafide intent.

4. Citing the Hon'ble Mumbai High Court's decision in a similar case, the Tribunal emphasized the doctrine of Revenue neutrality. The Tribunal referred to various court decisions and tribunal rulings supporting the concept of Revenue neutrality in cases where inputs were transferred to sister units without reversal of credit.

5. Considering the Revenue-neutral situation and the appellant's status as a PSU, the Tribunal held that the extended period was not applicable. Therefore, the impugned orders were set aside, and the appeal was allowed with consequential relief.

This detailed analysis of the judgment highlights the key issues, arguments presented by both sides, relevant legal principles, and the Tribunal's decision based on the doctrine of Revenue neutrality and the appellant's status as a public sector undertaking.