2019 (5) TMI 1432 - HC - Central Excise

CENVAT Credit - import of ceramic tiles between June, 2010 and January, 2014 - CCESC declined to permit adjustment of the duty already paid and Cenvat Credit - amendment to the Rule 4 of the CCRs with effect from 11th July, 2014 - Cenvat credit after 6 months of the date of issue of any of the documents in Rule 9 (1) - HELD THAT - There is substance in the contention of the learned counsel for the Assesses in both the cases that the above amended provision cannot be given retrospective effect - As explained in EICHER MOTORS LTD. VERSUS UNION OF INDIA 1999 (1) TMI 34 - SUPREME COURT the rule of lapse of credit lying with it unutilized on the date of amendment, cannot be applied to the goods manufactured prior to the date of the amendment. This is based on the principle that the right to adjustment of tax on final products accrues to an Assessee on the date when they paid the tax on the raw materials and that right would continue until the facility available thereto gets worked out. In the present case, the credit accrued when CVD was paid on finished goods deemed to be cleared from home consumption when the dealers sold the goods at higher price by altering the MRP. The right to the Cenvat Credit accrued on the very day when the inputs were received. Consequently, in the present case, the Court is satisfied that the Amendment to Rule 4 (1) CCRs prescribing a time limit for claiming Cenvat Credit will not apply to the consignments in the present case where the import took place prior to the date of the amendment and the deemed manufacture took place when the MRP was altered, which also happened prior to the amendment. In other words, the CVD paid by the BRCPL will have to be permitted to be adjusted against the CE duty settled as will the service tax paid on the input services. Validity of order - non signature of all member who has heard the matter - HELD THAT - It is indeed true that the CCESC which heard the settlement application of the GCPL comprised of three members. Therefore, an order passed by just two of them, would obviously be unsustainable in law. Appeal disposed off.

Summary

Issues Involved:
1. Adjustment of duty already paid and Cenvat Credit by GCPL.
2. Validity of CCESC’s decision in the case of BRCPL.
3. Retrospective application of the amendment to Rule 4 of the Cenvat Credit Rules (CCRs).

Detailed Analysis:

1. Adjustment of Duty and Cenvat Credit by GCPL:
GCPL challenged the CCESC's order dated 23rd June 2016, which declined to permit the adjustment of duty already paid and Cenvat Credit. GCPL argued that the CCESC should have settled the entire matter, including the adjustment of CVD and service tax components, rather than remanding it to the jurisdictional Commissioner. The petitioner cited the Supreme Court's decision in Eicher Motors Ltd. v. Union of India, asserting that their case was covered by this precedent. The CCESC, however, applied the Supreme Court’s decision in Osram Surya (P) Ltd. v. Commissioner of Central Excise, Indore, and left the issue of Cenvat Credit to the jurisdictional Commissioner. Additionally, GCPL pointed out procedural irregularities, noting that their application was heard by a three-member Bench of the CCESC, but the impugned order was signed by only two members.

2. Validity of CCESC’s Decision in the Case of BRCPL:
The Department contested the CCESC’s decision in the BRCPL case, arguing that BRCPL declared the wrong MRP at the time of import, thus being deemed a manufacturer at the time of import. Consequently, an SCN had to be issued for the differential duty (CVD), and the question of allowing Cenvat Credit did not arise. The Department also cited Notification No. 21/2014-CE(NT) dated 11th July 2014, which prescribed a time limit for taking Cenvat Credit. The CCESC, however, held that a substantive right cannot be denied due to procedural irregularities and allowed the Cenvat Credit adjustment of the CVD amount paid by BRCPL. The CCESC’s decision relied on the principle that the amendment to the CCRs did not have retrospective effect, thereby permitting the adjustment of the CVD and interest amounts paid by BRCPL.

3. Retrospective Application of the Amendment to Rule 4 of the CCRs:
The Court examined the amendment to Rule 4 of the CCRs effective from 11th July 2014, which imposed a time limit for claiming Cenvat Credit. The Court held that this amendment could not be given retrospective effect, as established in Eicher Motors Ltd. v. Union of India. The right to adjustment of tax on final products accrues on the date when the tax on raw materials is paid, and this right continues until the facility is utilized. The Court cited multiple precedents, including Jayam & Co. v Assistant Commissioner and Samtel India Ltd. v. CCE, Jaipur, affirming that a provision introduced for the first time cannot be given retrospective effect. Consequently, the amendment to Rule 4 (1) CCRs did not apply to consignments where the import and deemed manufacture occurred before the amendment date.

Conclusion:
The Court set aside the impugned order dated 23rd June 2016 by the CCESC in the case of GCPL, permitting the adjustment of CVD and service tax against the settled duty liability. The penalty imposed on GCPL was reduced from ?60 lacs to ?1 lac, aligning with the BRCPL case. The Court rejected the Department’s challenge to the CCESC’s decision in the BRCPL case, affirming the CCESC’s allowance of Cenvat Credit adjustment. The Court emphasized that the amendment to Rule 4 (1) CCRs could not be applied retrospectively to the consignments in question.