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2022 (1) TMI 760 - AT - Central ExciseCENVAT Credit - inputs - inputs were received between November 1997 and December 1998 - denial of credit on the ground that under rule 3(1) of the 2004 Credit Rules, credit could be availed only in respect of the central excise duty paid on inputs received in the factory of the manufacturer on or after 10.09.2004 - eligibility of the appellant to avail credit under rule3(2) of 2004 Credit Rules - failure on the part of appellant to produce documentary evidence in the form of relevant invoices/records showing receipt, issuance, consumption and proper accounts of inputs on which credit was availed - violation of rule 9(5) of the 2004 Credit Rules - interest - penalty - HELD THAT - In the present case, it is seen that the appellant has explained as to why it could not immediately avail CENVAT credits on Tanks fabricated in the year 2007. It has been stated that the process of collating and mapping the actual quantity of steel plates issued and consumed in the fabrication of Storage Tanks took some time as the goods were received between 1997-1998 and the fabrication work of Storage Tanks was completed only in the year 2007. It needs to be noted that under rule 4(1) of the 2004 Credit Rules, it was only in September 2014 that a time limit of 6 months/1 year was prescribed for availing CENVAT credit. The observations made by the Commissioner in the impugned order that declaration was required to be filed under rule 57(G) of the 1944 Excise Rules, is also not relevant as the eligibility of inputs received by the appellant in the factory was to tested in terms of the 2004 Credit Rules and not the rule prevalent earlier, namely rule 57(G) of the 1944 Excise Rules. Even otherwise, the receipt of the HR sheets and Steel Plates were covered under the declarations submitted by the appellant under the erstwhile rule 57(T) of the 1944 Excise Rules. Copies of these declarations have been filed and from the same it is clear that the HR sheets under Steel Plates had been declared to the Department. The Commissioner, on his own, examined as to whether the appellant was eligible to avail and utilize CENVAT credit under rule 11 or rule 3(2) of the 2004 Credit Rules. It needs to be noted that the appellant had not made any such claim for availing the credit. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Eligibility of CENVAT credit on inputs received prior to 10.09.2004. 2. Compliance with the conditions for availing CENVAT credit under the 2004 Credit Rules. 3. Determination of whether steel plates can be considered as inputs for the manufacture of petroleum products. 4. Timeliness of availing CENVAT credit. 5. Imposition of interest and penalty under the relevant rules. Detailed Analysis: 1. Eligibility of CENVAT Credit on Inputs Received Prior to 10.09.2004: The core issue was whether the appellant could avail CENVAT credit on steel plates received in 1997-1998, used for fabricating storage tanks, and availed in 2010. The Commissioner initially accepted that the eligibility for CENVAT credit should be determined under the 2004 Credit Rules, which were in force when the appellant was granted registration in November 2006. However, the Commissioner ultimately denied the credit, citing that the inputs were received before 10.09.2004, the effective date of the 2004 Credit Rules. This conclusion was inconsistent with the earlier finding that the factory came into existence only upon registration in 2006. 2. Compliance with Conditions for Availing CENVAT Credit: The show cause notice alleged that the appellant violated rules by not earning credit under the 1944 Excise Rules and failing to file necessary declarations. The Commissioner upheld the denial of credit based on reasons beyond those in the show cause notice, which is impermissible as per the Supreme Court's rulings in Ballarpur Industries Ltd. and Toyo Engineering India Limited. The show cause notice is foundational, and the order must confine itself to its allegations. 3. Steel Plates as Inputs for Manufacture of Petroleum Products: The Commissioner’s finding that steel plates cannot be considered as inputs for manufacturing petroleum products was beyond the scope of the show cause notice and incorrect. Rule 2(k) of the 2004 Credit Rules defines inputs broadly to include all goods used in or in relation to the manufacture of final products. The Supreme Court in Solaris Chemtech Limited affirmed that inputs cover goods used for rendering the final product marketable or used in the manufacturing process. Thus, steel plates used for fabricating storage tanks are indeed inputs. 4. Timeliness of Availing CENVAT Credit: The Commissioner erroneously held that CENVAT credit should have been availed immediately upon receipt of inputs, citing a long gap as unreasonable. However, Rule 4(1) of the 2004 Credit Rules uses "may" instead of "shall," indicating no strict time limit. The CBEC Circular dated 29.08.2000 clarified that credit need not be taken immediately. Tribunal decisions in Coromandel Fertilizers Ltd. and Steel Authority of India Ltd. supported that credit can be availed even after a significant time lapse if no outer time limit is prescribed. 5. Imposition of Interest and Penalty: The Commissioner imposed a penalty under rule 15(1) of the 2004 Credit Rules for contravention of provisions. However, the Department’s appeal for interest under rule 14 was dismissed as the rule applies only when credit is taken or utilized wrongly. The appellant’s detailed documentation and explanations for the delay in availing credit were not adequately considered by the Commissioner. Conclusion: The Tribunal set aside the Commissioner’s order, allowing the appellant’s appeal (Excise Appeal No. 601 of 2012) and dismissing the Department’s appeal (Excise Appeal No. 571 of 2012). The Tribunal recognized the appellant’s eligibility for CENVAT credit under the 2004 Credit Rules, the broad definition of inputs, the lack of a strict time limit for availing credit, and the improper basis for denying credit and imposing penalties.
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