2019 (5) TMI 1094 - AT - Central Excise

CENVAT Credit - time limitation - wrong input credit availed on the basis of invoices issued beyond six months - violation of Rules 3(1) and 4(1) ibid read with Notification No. 06/2015-C.E. (N.T.) dated 01.03.2015 - HELD THAT - Hon ble High Court of Gujarat in the case of M/s. Baroda Rayon Corporation Ltd. Vs. Union of India 2011 (3) TMI 1551 - GUJARAT HIGH COURT in this context assumes importance when the Hon ble High Court concluded that the Notification to the extent it prescribed the time limit was bad and consequently quashed the same - The situation is no different here since neither Rule 3(1) nor Rule 4(1) prescribes any such time limits. Rather, it is the Notification No. 06/2015 relied upon by the adjudicating authority, which was also approved by the Commissioner (Appeals), that has prescribed the time limit and therefore, the contravention, if any, could be of the time limit prescribed in the Notification alone - credit cannot be denied on this ground. CENVAT Credit - input services - Rent-a-Cab Agency Services - HELD THAT - As long as the fact remains that the employees of the appellant were transported for carrying out their work for the appellant and that their services were used in the manufacturing of the final product, the credit cannot be denied since it is directly covered in the inclusive definition - Credit allowed. CENVAT Credit - credit availed twice on the basis of same invoices - HELD THAT - The fact that it had reversed such credit is on record along with the fact that though it had availed, had not utilized the same - The above aspect coupled with the vital contentions of the assessee that it had more than ₹ 60,00,000/- worth credit in its CENVAT Register has not at all been discussed and if the above facts were found to be true, then the Revenue cannot claim any loss - the issue requires fresh examination by the adjudicating authority who shall consider all the above arguments, verify documentary evidences that may be filed and then pass a speaking order - Matter on remand. Demand of Interest under Section 11AA of the Central Excise Act, 1944 - HELD THAT - The interest is mandated only if the person is liable to pay duty and that such interest shall be calculated from the date on which such duty becomes due up to the date of actual payment - Both authorities have recognized the reversal/debit with a rider as to the same being after the issuance of Show Cause Notice vide entries in CENVAT Credit Register dated 16.07.2017. Then, Sub-Section 3(b) extracted hereinabove should come to the rescue of the appellant, as per which no interest could be demanded even if the duty is paid after the date of the order but before forty five days and apparently, the above test seems to be satisfied here - adjudicating authority shall consider the above aspects also, hear the assessee and then pass a speaking order on this and only then demand appropriate interest, if any. Penalty u/s 11AC - HELD THAT - The issues were seriously debatable involving interpretations of Rules/Instruction and moreover, the findings of the adjudicating authority while issuing Show Cause Notice as to the audit observation from books/returns itself points out that there was no suppression, fraud, etc. or that no defect as such was pointed out - penalty not imposable. Appeal allowed in part and part matter on remand.

Summary

Issues: Alleged wrongful input credit, denial of CENVAT credit, interest under Section 11AA, penalty under Section 11AC

Alleged wrongful input credit:
The appeal was filed against the Order-in-Appeal alleging the appellant had taken wrong input credit on various grounds. The appellant contended that no ineligible credit was taken and justified the input credit on Rent-a-Cab Agency Services as essential for manufacturing the final product. The adjudicating authority denied the benefit based on contraventions of CENVAT Credit Rules, 2004. The consultant for the appellant argued that the eligibility of the appellant was not disputed, and the disallowance was based on alleged rule violations. The Tribunal noted the absence of time limits in Rules 3(1) and 4(1) and highlighted a High Court decision invalidating a similar time limit notification. The Tribunal concluded that any contravention would be related to the time limit in the notification alone.

Denial of CENVAT credit:
The Tribunal analyzed the denial of CENVAT credit for Rent-a-Cab Agency Services. The appellant argued that such services fell under the inclusive definition of "input service" in Rule 2(l) of the CENVAT Credit Rules, 2004. The Tribunal emphasized that as long as employees were transported for work related to manufacturing the final product, credit could not be denied. It pointed out the lack of discussion on this aspect by the lower authorities and highlighted the inclusive definition to support the appellant's claim.

Interest under Section 11AA:
Regarding interest under Section 11AA of the Central Excise Act, the Tribunal noted that interest is payable if duty becomes due and is calculated from the due date to actual payment. It highlighted the provision exempting interest if duty is voluntarily paid within forty-five days of a specific order. The Tribunal observed that the appellant reversed/debited the amount before the order, potentially exempting them from interest. It directed the adjudicating authority to consider this exemption and issue a speaking order accordingly.

Penalty under Section 11AC:
The Tribunal discussed the penalty imposed under Section 11AC, noting debatable issues involving rule interpretations. It highlighted that no suppression or fraud was indicated in the audit observations, warranting the deletion of the penalty. The Tribunal directed the deletion of the penalty under Section 11AC due to the lack of evidence supporting its imposition.

In conclusion, the Tribunal partly allowed the appeal and remanded the matter for re-adjudication. It emphasized the need for a fresh examination considering all appellant's arguments and evidence. The Tribunal also directed a review of interest applicability under Section 11AA and the deletion of the penalty under Section 11AC based on the debatable nature of the issues involved.