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2023 (5) TMI 332 - AT - Central ExciseRecovery of CENVAT Credit - job-worker - access of job-workers , contrived by payment of tax under Finance Act, 1994 that they are not obliged to, both before, and in, the negative list regime, to CENVAT Credit Rules, 2004 - Benefit of exemption under N/N. 8/2005-ST dated 1st March 2005 and N/N. 25/2012-ST dated 20th June 2012 - Capital goods that were not found in the premises of the principal manufacturers who had availed credit thereon under CENVAT Credit Rules, 2004 - HELD THAT - The sequence of detriment leading to recovery of credit availed by the three principal manufacturers under rule 14 of CENVAT Credit Rules, 2004 is founded upon the imposition of mandatory acceptance of exemption from tax as provider of business auxiliary service and taxable service over the time span of dispute for which the adjudicating authority has drawn upon the manner in which exemptions under section 5A of Central Excise Act, 1944 are administered. From such determination, it was held that tax, having been collected without authority of law, is transformed as deposit contemplated in section 73A of Finance Act, 1994 and that, with the consequent erasure of documentation evincing supply of service, the principal manufacturers find themselves barred by rule 9 of CENVAT Credit Rules, 2004 from continued retention of credit. Presumption based on inferred inter-connection of job-worker and principal manufacturer cannot be the basis for determination of compliance with condition. Section 73A of Finance Act, 1994 comprises three elements the requirement of depositing with the government any collection in excess of tax, or collection of tax not leviable, by such person of his own volition, empowerment of Central Excise Officer to place such person on notice and determine the amount so due, and the disposition of such amount so deposited culminating in refund to the person who has borne the incidence of such amount. It is plainly obvious from a bare reading thereof, that the said provision may be invoked only for recovery of such amounts as have not been deposited with the Central Government. It does not envisage such amount to be segregated from tax paid as a deposit in the manner accomplished by the adjudicating authority - The logical conclusion of invoking section 73A of Finance Act, 1994 would be the issue of public notice intimating eligibility of person who has borne the incidence of such amount for refund. The adjudicating authority, as Central Excise Officer contemplated in the provision, has not administered the mandate of law appropriately even if section 73A of Finance Act, 1994 could have been drawn upon. The consequence of such determination in the adjudication order has been the recovery of identical amount from the three principal manufacturers; the entitlement to refund of the amount, under section 73A of Finance Act, 1994, renders the entire exercise of adjudication, insofar as availment of credit of tax collected by the job worker is concerned, to be futile and in a circular loop. That is bizarre, if nothing else Capital goods that were not found in the premises of the principal manufacturers who had availed credit thereon under CENVAT Credit Rules, 2004 - HELD THAT - The decision of the Tribunal in ZENITH MACHINE TOOLS PVT. LTD. VERSUS COMMISSIONER OF C. EX., BELGAUM 2010 (4) TMI 481 - CESTAT, BANGALORE has held that there is no dispute that the said capital goods are utilised by the job worker, it would lend support to the argument that there would be a revenue neutrality and the reversal of Cenvat credit would be revenue neutral as the appellant is entitled to take credit on such amount as soon as he receives the capital goods back from the job worker s premises. This being the case, I do not find any reason for reversal of the Cenvat credit on the capital goods which are found in the factory premises the job worker, who is undisputedly one of the group concerns of the appellant. Thus, it is seen that the consequence of non-return of the capital goods within the stipulated time is temporary reversal of the credit, taken initially on procurement, and to be restored upon the return, as and when it takes place, without any other consequence. The notice had been issued to the three principal manufacturers on the basis of physical inspection and, in the context of the limited and temporary deprivation of credit, it would have been inappropriate for the adjudicating authority to determine the deployment prevailing at the time of adjudication - The reversal of credit, claimed well before the issue of show cause notice, has not been controverted by tax authorities at any stage till now. Consequently, the demand of the same under rule 14 of CENVAT Credit Rules, 2004 is not tenable. Denial of credit to the ten job workers and consequent deeming of tax paid under Finance Act, 1994 as deposit in terms of section 73A of Finance Act, 1994 - HELD THAT - The denial is not maintainable. With the tax having been properly discharged, there is no scope for denial of such amount as credit available under CENVAT Credit Rules, 2004 to the three principal manufacturers. The recovery of ₹ 5,65,95,738 from the three principal manufacturers for the period from April 2010 to March 2015 under rule 14 of CENVAT Credit Rules, 2014 lacks authority of law. The recovery of ₹ 64,76,017 of credit availed on capital goods under rule 14 of CENVAT Credit Rules, 2004, having already been reversed by the principal manufacturers, is redundant. The demand for appropriate interest and imposition of penalties also fails. Appeal allowed.
Issues Involved:
1. Deprivation of CENVAT credit to principal manufacturers. 2. Tax liability and credit eligibility of job-workers. 3. Compliance with CENVAT Credit Rules, 2004 regarding capital goods. 4. Mandated availment of exemptions under Finance Act, 1994. 5. Application of Section 73A of Finance Act, 1994. Issue-wise Comprehensive Details: 1. Deprivation of CENVAT Credit to Principal Manufacturers: The appeals by three manufacturers challenge the deprivation of credit amounting to Rs. 2,96,95,510 and Rs. 49,59,792 availed by M/s Anasuya Auto Press Parts Pvt Ltd, and similar amounts by other manufacturers, directed to be recovered under rule 14 of CENVAT Credit Rules, 2004. The Tribunal found that the denial of credit availed by the job-workers and consequent deeming of tax paid under Finance Act, 1994 as deposit in terms of section 73A of Finance Act, 1994 is not maintainable. With the tax having been properly discharged, there is no scope for denial of such amount as credit available under CENVAT Credit Rules, 2004 to the three principal manufacturers. 2. Tax Liability and Credit Eligibility of Job-Workers: The ten job-workers, despite not being burdened with demand, are aggrieved by the impact on their business model. The Tribunal noted that the job-workers, offering support facilities, discharged tax under Finance Act, 1994, enabling them to avail credit of tax paid on manpower recruitment and supply service. The Tribunal held that the denial of credit to the job-workers fails in law, and the tax paid by them should not be treated as a deposit under section 73A of Finance Act, 1994. 3. Compliance with CENVAT Credit Rules, 2004 Regarding Capital Goods: The Tribunal addressed the issue of capital goods not found in the premises of the principal manufacturers. It was held that the consequence of non-return of capital goods within the stipulated time is a temporary reversal of the credit, which can be restored upon return. The reversal of credit claimed by the principal manufacturers was not contested by tax authorities, making the demand under rule 14 of CENVAT Credit Rules, 2004 untenable. 4. Mandated Availment of Exemptions under Finance Act, 1994: The adjudicating authority's imposition of mandatory acceptance of exemption from tax under Finance Act, 1994 was challenged. The Tribunal referred to the decision of the Hon'ble High Court of Karnataka in re Federal Mogul TPR India Ltd, which clarified that exemptions under section 93 of Finance Act, 1994 are conditional and cannot be imposed on an assessee opting not to comply with the conditions. The Tribunal concluded that the denial of credit based on the non-availment of exemptions is not justified. 5. Application of Section 73A of Finance Act, 1994: The Tribunal found that section 73A of Finance Act, 1994 was invoked incorrectly by the adjudicating authority. This section pertains to the recovery of amounts not deposited with the government, which was not the case here. The adjudicating authority's approach led to a circular loop, rendering the entire exercise of adjudication futile. Conclusion: The Tribunal set aside the impugned orders, allowing the appeals, and concluded that the recovery of Rs. 5,65,95,738 from the three principal manufacturers under rule 14 of CENVAT Credit Rules, 2004 lacks authority of law. The demand for appropriate interest and imposition of penalties also fails. The order was pronounced in the open court on 27/03/2023.
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