2022 (9) TMI 1120 - AT - Central Excise

CENVAT Credit - sale of entire cement division operations - JSW Steel Ltd. (transferor company) provided any services to the appellants or not - Time limitation - HELD THAT - The disputed debit notes were issued by debiting the books of account of the appellant, with the narration being re-imbursement of expenses incurred for procurement of Clinker . It is evident from such debit notes that when the expenses were incurred for procurement of inputs by M/s. JSW Steel Ltd., such company was not merged or taken over by the appellant. Further, there is also no mention about the specific services, which were procured by the transferor company. Sub-rule (1) Rule 3 of the Cenvat Credit Rules, 2004 permits a manufacturer of final product to take cenvat credit of various duties paid on the inputs or capital goods received in the factory of manufacture of final products and input services by such manufacturer. Since M/s. JSW Steel Ltd. was entirely a separate corporate entity at the time of procurement of inputs, the requirements of the said statutory provisions have not been complied with by the appellants inasmuch as, at the time of procurement of inputs, the transferor company was the beneficiary of such cenvat credit of Central Excise duty or Service Tax paid on the inputs/input services - there are no infirmity in the impugned order passed by the learned Commissioner (Appeals) in denying the cenvat benefit to the appellants. Time limitation - HELD THAT - Since, there is no element of suppression of facts and the irregular availment of cenvat credit was duly recorded in the books of accounts and audited by the department, the cenvat demand if any, should be confined to the normal period and the extended period of limitation cannot be invoked for effecting recovery of such cenvat credit. In the present case, it is an admitted fact on record that the show cause notice was issued by the department on 21.06.2017, which is much beyond the normal period prescribed under Section 11A of the Central Excise Act, 1944 read with Rule 14 ibid - the appeal filed by the appellants should succeed on the ground of limitation. The appeal is allowed in favour of the appellants on the ground of limitation.

Summary

Issues:
1. Availment of cenvat credit based on debit notes for procurement of inputs and services.
2. Denial of cenvat benefit and imposition of penalty.
3. Bar on limitation period for recovery of cenvat credit.

Analysis:

Issue 1:
The case involved the appellants availing cenvat credit amounting to Rs. 47,31,160 based on debit notes issued by the transferor company for the procurement of inputs and services. The original authority held that no services were provided by the transferor company for use in the manufacture of the final product, thus denying the cenvat credit. The Commissioner (Appeals) upheld this decision, leading to the appeal before the Tribunal.

Issue 2:
The appellants argued that the cenvat credit was rightfully availed as the raw materials and stores were transferred to them upon the change of ownership. However, the Tribunal found that the transferor company was a separate entity at the time of procurement of inputs, and the statutory provisions were not complied with. As the transferor company was the beneficiary of the cenvat credit at the time of procurement, the benefit could not be extended to the appellants. Consequently, the denial of the cenvat benefit was deemed justified.

Issue 3:
Regarding the limitation period for recovery of cenvat credit, the appellants contended that the proceedings initiated by the department were time-barred. The Tribunal noted that the information regarding the cenvat credit was known to the department in April 2015 when the appellants filed their returns and deposited the Service Tax amount. As there was no suppression of facts and the irregular credit was recorded and audited, the extended period of limitation could not be invoked. The Tribunal ruled in favor of the appellants on the ground of limitation, setting aside the impugned order and allowing the appeal.

In conclusion, the Tribunal found that the denial of the cenvat benefit was justified due to non-compliance with statutory provisions by the appellants. However, the appeal succeeded on the ground of limitation, as the department's proceedings were deemed time-barred.