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2022 (2) TMI 4 - AT - Central ExciseCENVAT Credit - credit on inputs lying in stock work in progress and finished goods as on the date of rescinding of the exemption notification in terms of sub-rule 2 (3) of CCR 2004 - credit denied on the ground that in terms of proviso to Rule 4 (1) of the Cenvat Credit Rules 2004 credit can be availed only within one year from the date of invoice - credit was sought to be availed after rescinding of N/N. 62/1995-CE dated 16.03.1995 - HELD THAT - The provisions of Rule 4 are very clear as regards the time limit for availment of Cenvat credit. It is founs that the provisions of Rules cannot be read in isolation. The entire set of Rules covering availment/utilization of credit i.e. CCR 2004 has to be read in a holistic manner and interpreted in a harmonious manner. The non obstante clause in Rule 3 (2) is not with reference to the entire Cenvat Credit Rules but with respect to sub-rule 1 of Rule 3 alone. It means to say that the provisions of other Rules will have to be followed and the only relaxation given is with respect to availment of credit in transition from manufacture of exempted goods to manufacture of dutiable goods - thus even the transitional credit will be subjected to the provisions of Rule 4 (1) of CCR 2004. Time limitation - HELD THAT -It is abundantly clear that the appellants have put the department to notice vide their letter dated 29.04.2016 and ER-1 Returns. Therefore it was not open for the department to issue SCN dated 27.06.2019 after the lapse of more than two years there too alleging suppression of facts with intent to evade payment of duty etc. We find that there is not even an iota of truth in the allegation of the department as per the records of the case. Moreover looking into the fact that the appellants are a company under the Ministry of Defence intention to evade payment of duty cannot be alleged - under the facts and circumstances of the case even any other company could not have been charged with suppression of facts with an intention to evade payment of duty. The appellants have though not made out a case on merits of the issue have certainly made out a strong case in their favour on limitation and succeed on this count - SCN is time barred - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Entitlement to Cenvat credit on inputs lying in stock, work in progress, and finished goods post-rescinding of exemption notification. 2. Applicability of the time limit for availing Cenvat credit under Rule 4 (1) of CCR, 2004. 3. Limitation period for issuing Show Cause Notice (SCN). Detailed Analysis: 1. Entitlement to Cenvat Credit: The main issue is whether the appellants are entitled to Cenvat credit on inputs lying in stock, work in progress, and finished goods as of the date of rescinding of the exemption notification per Rule 3 (2) of CCR, 2004. The appellants argued that Rule 3 (2) allows credit for inputs in stock when the final product ceases to be exempted. They contended that the non-obstante clause in Rule 3 (2) takes precedence over other rules, including Rule 4 (1). The appellants cited several cases to support their argument that the time limit of six months or one year is not applicable for invoices issued before 01.09.2014. 2. Applicability of the Time Limit: The department's stance, reiterated in the Order-in-Original, was that the credit availed by the appellants is not admissible as per the proviso to Rule 4 (1) of CCR, 2004, which mandates that credit can only be availed within one year from the date of invoice. The tribunal observed that the provisions of Rule 4 are clear regarding the time limit for availing Cenvat credit and must be read in a holistic and harmonious manner with other rules. The tribunal agreed with the Commissioner’s interpretation that the transitional credit is subject to the provisions of Rule 4 (1). 3. Limitation Period for Issuing SCN: The appellants argued that the issue is also hit by limitation. They had informed the department of their intent to avail Cenvat credit via a letter dated 29.04.2016 and reflected the credit in their ER-1 returns for September 2016. The SCN was issued on 27.06.2019, beyond the permissible period. The tribunal found that the appellants had put the department on notice through their letter and returns, and thus, the SCN issued after more than two years was time-barred. The tribunal noted that the appellants, being a company under the Ministry of Defence, could not be alleged to have an intention to evade payment of duty. Conclusion: The tribunal concluded that while the appellants did not succeed on the merits of the issue regarding the entitlement to Cenvat credit, they made a strong case on the ground of limitation. The SCN was deemed time-barred, and the appeal was allowed on this count, with consequential reliefs as per law. Order Pronounced: The appeal was allowed, and the SCN was declared time-barred. The order was pronounced in the Open Court on 31.01.2022.
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