2024 (6) TMI 614 - AT - Central Excise

CENVAT Credit - denial on the ground that the appellant (Howrah unit) has never dispatched their finished goods to the Administrative unit situated at V. V. Nagar, Gujarat and the input service distributed to the appellant by the administrative office has no direct or indirect relation with final product manufacture and cleared by the appellant - time limitation - suppression of facts or not. HELD THAT - It is observed that the disputed Cenvat credit in this case has been availed by the appellant during the period March 2005 to March 2009. During the relevant period, the distribution of Cenvat credit on Pro-Rata basis was not there in the Cenvat Credit Rules. A conjoint reading of Rule 7 existed prior to issue of Notification 18/2012 CE(NT) and after issue of the notification would clearly reveal that there was no condition in force to distribute the Cenvat based on usage of input service or turnover. The restrictions for proportionate distribution was introduced subsequently vide Notification No. 18/2012-C.E. (N.T.). Thus, it is observed that during the relevant period there was no requirement of establishing one to one correlation. Accordingly, the denial of Cenvat credit in the impugned order is not sustainable. Time Limitation - HELD THAT - In the impugned order, the demand has been confirmed for the period March 2005 to March 2009. The SCN in this case was issued 24.02.2010. There is no evidence brought on record to substantiate the allegation that suppression of fact with an intention to evade payment of tax exists in this case. Thus, the extended period cannot be invoked to deny the credit in this case - the impugned order confirming the demand by invoking extended period of limitation is liable to be set aside. The impugned order is set aside - appeal allowed.

Summary

Issues involved: Denial of Cenvat credit, limitation of time for demand.

Denial of Cenvat credit: The appeal was filed against an Order-in-Original denying Cenvat Credit, interest, and imposing penalty under section 11AC of the Central Excise Act, 1944. The issue revolved around the denial of credit availed at the manufacturing unit due to lack of direct or indirect relation between input service and final product manufacture. The appellant argued that the credit was availed before the introduction of the requirement for proportionate distribution, citing relevant rules and notifications. They also referenced legal decisions and a circular by the Central Board of Excise and Customs to support their claim.

Limitation of time for demand: The appellant contended that the demand for the period March 2005 to March 2009 was time-barred under Section 11A of the Central Excise Act, 1944. They argued that the demand raised in 2010 was beyond the prescribed one-year period for serving notices on duty chargeable persons. The Tribunal observed that the extended period could not be invoked without evidence of suppression of facts to evade tax payment, leading to the conclusion that most of the demand confirmed in the impugned order was barred by limitation.

Decision: After considering the arguments and legal precedents, the Tribunal held that the denial of Cenvat credit was not sustainable as the distribution rules in force during the relevant period did not require a one-to-one correlation. Citing relevant court decisions and a circular by CBEC, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief as per law.