2019 (10) TMI 1141 - AT - Central Excise

Area based exemption - benefit of N/N. 50 of 2003 - Job-work - process amounting to manufacture - the benefit of the job work was not extended to the appellant on the ground that principal manufacturer was exempted in terms of the area based exemption notification and was not paying any duty of excise - HELD THAT - There was a finding in favor of the assessee by the Original Adjudicating Authority as regards admissibility of cenvat credit which finding was not challenged by the Revenue, even though the Assistant Commissioner did not extended the benefit and did not calculated the value of demand by neutralizing the same against the cenvat credit. In such a scenario it was not justifiable on the part of Commissioner (Appeals) to deny the cenvat credit to the assessee on the ground of invoices being more than 6(six) months old - the demand now being confirmed against the assessee is required to be neutralized against the cenvat credit available to them for which they will produce documentary evidence. Time limitation - HELD THAT - Inasmuch as appellants were paying service tax on the same activity and were filing ST-3 Returns there was due knowledge on the part of the Revenue and no mala fide can be attributed to the appellant so as to invoke the longer period. Penalty - HELD THAT - Inasmuch as we have held absence of any mala fide on the part of the appellant, the penalty imposed upon them is set aside in toto. The matter remanded to Original Adjudicating Authority to re-quantify the duty falling within the normal period of limitation and after extending the benefit of cenvat credit of duty paid on the inputs, as also by taking into account the service tax paid by the appellant in respect of the same activities during the relevant normal period. Appeal allowed by way of remand.

Summary

Issues: Assessment of duty, admissibility of cenvat credit, time limitation for claiming credit, imposition of penalty.

Assessment of Duty:
The appellants were engaged in manufacturing sheet metal components and providing job work for a principal manufacturer availing area-based exemption. Revenue contended that the appellant's activity amounted to manufacture and initiated proceedings raising a demand of duty for a specific period. The appellants argued that they had discharged service tax on the activity under the knowledge of Revenue, limiting the Revenue's ability to claim for a longer period. The Original Adjudicating Authority supported the appellant's claim for cenvat credit, but the Commissioner (Appeals) denied the credit due to the age of the invoices. The tribunal found in favor of the assessee, holding that the demand should be neutralized against the available cenvat credit, which the appellant can prove with documentary evidence.

Admissibility of Cenvat Credit and Time Limitation:
The Original Adjudicating Authority allowed the cenvat credit for duty paid on inputs, which the Revenue did not challenge. The Commissioner (Appeals) denied the credit due to the age of the invoices, but the tribunal held that the credit claim was made only when the demand of excise duty was confirmed, making the 6-month limitation under Rule 4 of Cenvat Credit Rules inapplicable. The tribunal directed the Original Adjudicating Authority to re-quantify the duty within the normal period, considering the cenvat credit and service tax paid by the appellant during that time.

Imposition of Penalty:
The tribunal found no mala fide on the part of the appellant, setting aside the penalty imposed. The absence of mala fide led to the complete removal of the penalty. The appeal was disposed of based on the above terms, with the tribunal remanding the matter to the Original Adjudicating Authority for re-quantification of duty and adjustments based on cenvat credit and service tax payments during the relevant period.