2024 (6) TMI 495 - AT - Central Excise

Levy of Excise duty - manufacture and clearance of Fertilisers, namely, Di-Ammonium Phosphates (DAP), Nitrogen Phosphorus and Potassium (NPK) - Appellant has not utilized the CENVAT Credit on common input services under Rule 6(5) of the CENVAT Credit Rules, 2004 at the time of clearances of such fertilisers - alleged contravention of N/N. 1/2011-CE dated 01.03.2011 - HELD THAT - Rule 6(5) of the CCR is a special provision allowing CENVAT credit on certain specified services such as maintenance or repair service, transport of goods by road service, security service etc. It has an overriding effect over the sub-rules (1), (2) and (3) of Rule 6 of CENVAT Credit Rules, 2004. The only limitation prescribed in the said sub-rule (5) is that the specific services should not be exclusively used in or in relation to the manufacture of the exempted goods. In the present case, it is observed that the appellant has utilized the said credit availed on the specified services only for payment of duty on other dutiable products such as Phospho Gypsum, Sulphuric Acid and Phosphoric Acid, which are removed by the Appellant on payment of Central excise duty at normal rate. The restriction mentioned in Rule 6(5) of the CENVAT Credit Rules, 2004 is not applicable to the Appellant. Accordingly, the availment of CENVAT CREDIT of input services as provided under Rule 6(5) of the CENVAT Credit Rules, 2004 would not be a bar to avail the benefit of concessional rate of duty as provided under Notification No. 1/2011-CE. The Appellant is eligible for the concessional rate of duty @1% available in terms of the Notification No. 1/2011-CE. Accordingly, the demand of duty confirmed in the impugned order is set aside. Since, the duty demanded is not sustainable, the question of demanding interest and imposing penalty does not arise. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Eligibility for concessional rate of duty under Notification No. 1/2011-CE.
2. Availment of CENVAT Credit on input services under Rule 6(5) of the CENVAT Credit Rules, 2004.
3. Invocation of extended period of limitation for demand.

Summary:

Issue 1: Eligibility for Concessional Rate of Duty
The primary issue is whether the Appellant is liable to pay excise duty on the manufacture and clearance of Di-Ammonium Phosphates (DAP) and Nitrogen Phosphorus and Potassium (NPK) due to the alleged contravention of Notification No. 1/2011-CE dated 01.03.2011. The Appellant contended that they have not availed any CENVAT Credit on inputs and input services exclusively used for the manufacture of DAP & NPK, which are cleared at a concessional rate of 1% duty. The Department argued that the Appellant is not eligible for the concessional rate since they availed CENVAT Credit on common input services.

Issue 2: Availment of CENVAT Credit on Input Services
The Appellant availed CENVAT Credit on certain input services specified under Rule 6(5) of the CENVAT Credit Rules, 2004, such as maintenance or repair service, transport of goods by road service, and security service. The Appellant argued that Rule 6(5) has an overriding effect over sub-rules (1), (2), and (3) and allows credit on specified services unless used exclusively for exempted goods. They utilized the credit for payment of duty on other dutiable products like Phospho Gypsum, Sulphuric Acid, and Phosphoric Acid, not on DAP or NPK. The Tribunal observed that Rule 6(5) permits full credit on specified services even if part of such services is used in exempted business, as long as they are not exclusively used for exempted goods.

Issue 3: Invocation of Extended Period of Limitation
The demand was raised by invoking the extended period of limitation. The Tribunal referred to precedents, including Commissioner of C.Ex., Belapur v. Elder Pharmaceuticals Ltd. and Oil & Natural Gas Corporation Ltd. v. Commissioner of C.Ex., S.T. & Cus., Raigad, which supported the Appellant's position. It was held that the Appellant is entitled to avail CENVAT Credit on the specified services under Rule 6(5) and that the extended period of limitation is not invokable.

Conclusion:
The Tribunal concluded that the Appellant is eligible for the concessional rate of duty @1% under Notification No. 1/2011-CE and set aside the demand of duty, interest, and penalty confirmed in the impugned order. The appeal was allowed with consequential relief as per law.