2012 (8) TMI 473 - AT - Central Excise

Cenvat credit on inputs received from 100% EOU - appellants availing full Cenvat credit of CVD, Education Cess, Secondary and Higher Education Cess - Revenue contending inadmissibility in view of in view of Rule 3 of the Cenvat Credit Rules - Held that - It is the fact that the SCN was issued on 30.3.2010 demanding the cenvat credit for the period May, 2007 to October, 2008 i.e. beyond the period of one year. The appellants were relying on the decisions in the case of Shreya Pets Pvt.Ltd. vs. CCE, Hyderabad (2008 (9) TMI 351 - CESTAT, BANGLORE ) and others which were issued prior to the issue of SCN. Therefore, appellants were under bona fide belief that Cenvat credit is admissible on Education cess and Secondary and Higher Education cess even for the period prior to the amendment has considerable force. Order set aside - Decided in favor of assessee.

Summary

Issues:
1. Availing Cenvat credit on inputs from 100% EOU.
2. Applicability of Rule 3(7) of Cenvat Credit Rules, 2004.
3. Time limitation for issuing show-cause notice.
4. Eligibility for Cenvat credit of Education Cess and Secondary and Higher Education Cess.
5. Interpretation of relevant case laws by the Tribunal.

Analysis:
1. The appellants were availing Cenvat credit on inputs received from 100% EOU. Rule 3(7) of Cenvat Credit Rules, 2004 prescribes the formula for calculating Cenvat credit admissible in such cases. The appellants were found to be availing full Cenvat credit of CVD, Education Cess, Secondary and Higher Education Cess, exceeding the amount admissible under Rule 3(7). A show-cause notice was issued demanding the excess credit, which was confirmed by the original authority along with penalties.

2. The main contention raised by the appellants was the time limitation for issuing the show-cause notice. They argued that the notice was issued beyond the one-year limitation period. The appellants relied on Tribunal decisions, including Emcure Pharmaceuticals Ltd. and Shreya Pets Pvt.Ltd., to support their claim that Cenvat credit on Education Cess and Secondary and Higher Education Cess was admissible even before the amendment to Rule 3(7)(a) of Cenvat Credit Rules in 2009.

3. The Revenue, represented by the Dy. Commissioner, maintained that the appellants were not eligible for the Cenvat credit before the 2009 amendment and supported the lower authorities' decision to confirm the demand. However, the Tribunal, after considering the arguments from both sides, found merit in the appellants' argument regarding the limitation period. The Tribunal noted that the show-cause notice was issued beyond the one-year limit and acknowledged the appellants' reliance on Tribunal decisions predating the notice.

4. The Tribunal concluded that the appellants had a strong case based on the limitation issue and set aside the Order-in-Appeal, allowing the appeal. The judgment highlighted the appellants' bona fide belief, supported by Tribunal decisions, regarding the admissibility of Cenvat credit on Education Cess and Secondary and Higher Education Cess even before the 2009 amendment. The decision was made solely on the ground of limitation without delving into the merits of the case.

In summary, the Tribunal ruled in favor of the appellants, setting aside the Order-in-Appeal based on the limitation issue concerning the time bar for issuing the show-cause notice, as supported by their interpretation of relevant Tribunal decisions predating the notice.