2019 (12) TMI 616 - AT - Central Excise

CENVAT Credit - stock transfer - shifting of input from one unit to another - the appellant shifted inputs and certain capital goods from Unit-II to Unit-I for manufacture of dutiable final products - revenue neutrality - extended period of limitation - HELD THAT - Initially the appellant set up Unit-II for manufacture of Control Valves but subsequently, found that the space is inadequate and therefore, he set up another unit which is Unit-I adjacent to Unit-II and transferred some of the inputs and capital goods from Unit-II to Unit-I as per the advice given by the department. The appellant transferred the input and capital goods by raising invoice and debited duty in Unit-II and took credit of the same in Unit-I in terms of Rule 3(5) of the CCR. Both debit and credit entries made by both the units are reflected in the ER-1 returns and due intimation was given to the department by the appellant vide their letter dated 14.6.2010. Further, it is a case of simply stock transfer. Therefore, the restriction as provided in Rule 9(1)(b) of CCR is not applicable because the appellant has not availed credit on supplementary invoices. The appellant has paid the duty voluntarily in terms of Section 11A(2B) of the Central Excise Act on being pointed out by the Preventive Officers and took the credit of the same in Unit-I in terms of Rule 3 of the CCR. Extended period of limitation - HELD THAT - All the facts from the beginning were in the knowledge of the department and specific intimation was also given by the appellant vide its letter dated 14.6.2010 and therefore, invoking extended period of limitation to confirm the demand is not tenable in law. Therefore, the entire demand is also barred by limitation as the period of dispute is from 1.8.2008 to 10.09.2008 but the show-cause notice was issued on 4.5.2011 by invoking extended period of limitation alleging suppression. The impugned order is not sustainable on merit as well as on limitation - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against order confirming demand and penalty under CENVAT Credit Rules, 2004.

Analysis:
The case involved an appeal against an order confirming a demand of ?19,76,167/- along with equal penalty under Rule 15(2) of CENVAT Credit Rules, 2004. The appellant, engaged in manufacturing Control Valves, acquired land for a new unit due to capacity constraints. Separate registrations were obtained for Unit-I and Unit-II, with subsequent transfer of inputs and capital goods. The appellant followed advice from the Central Excise office for transferring CENVAT credit. After obtaining single registration for both units, a show-cause notice was issued alleging irregular CENVAT credit availment. The appellant reversed the credit, paid interest, and later re-availed the credit. The Commissioner (A) allowed the department's appeal, denying the credit and imposing penalties.

The appellant argued that the impugned order was unsustainable, as duty was paid along with interest, and subsequent proceedings should be quashed due to single registration. They contended that Rule 9(1)(b) of CCR did not apply, as the credit was voluntarily paid and transferred between units. The appellant cited various cases to support their arguments against denial of credit under Rule 9(1)(b) and suppression of facts.

The Tribunal found that the appellant's actions constituted a stock transfer, not credit availed on supplementary invoices. The payment of duty voluntarily, as per Section 11A(2B) of the Central Excise Act, did not amount to suppression of facts. The Tribunal relied on precedents to support the view that the exercise resulted in a revenue-neutral situation, precluding any intent to evade duty payment. Notably, the Tribunal highlighted that all facts were known to the department, and the extended limitation period invoked was not valid. Consequently, the demand was considered time-barred, and the impugned order was set aside, allowing the appeal of the appellant.

In conclusion, the Tribunal's decision focused on the procedural aspects of credit transfer between units, voluntary duty payment, lack of suppression of facts, and the inapplicability of Rule 9(1)(b) of CCR. The judgment emphasized the revenue-neutral nature of the transactions and the knowledge of facts by the department, leading to the appeal's success.