2013 (11) TMI 1080 - AT - Central Excise

Bar of Limitation - Cenvat credit Nexus between accumulated credit and manufacture Waiver of Pre-deposit Held that - It was only on 5.9.2011, a show-cause notice was served on the appellants for the period April 2005 to August 2009 it need not go into merits of the case as the appellant has a stronger case on the basis of limitation - when the manufacture was started for the first time in April 2008 and the ERI returns shows utilization of accumulated credit, it becomes obvious that the total the balance is of accumulated credit thus the extended period could not have been invoked in the case Relying upon M/s. Maruti Suzuki Ltd. Versus Commissioner of Central Excise, Delhi-III 2009 (8) TMI 14 - SUPREME COURT . There was an accumulated pending balance which was utilized for the payment of excise duty - the appellants have not suppressed any fact in view of the peculiar circumstances in this case where the appellant was providing only output services prior to April 2008 and from April 2008 onwards started manufacturing the excisable goods - it is difficult to take prima facie view that there was mis-declaration or suppression of facts on the part of the appellants the appellants have made out a prima facie case on limitation alone - there shall be waiver of pre-deposit and stay against recovery till the disposal Stay granted.

Summary

Issues:
1. Accumulated CENVAT credit utilization for payment of excise duty on packaged software.
2. Nexus between accumulated service tax credit and manufactured goods.
3. Applicability of limitation period in the case.
4. Waiver of pre-deposit and stay against recovery during appeal.

Analysis:
1. The appellant started producing packaged software liable to excise duty in April 2008 after accumulating credit of over Rs.2 crores from service tax paid on input services. The Revenue contended that utilizing this accumulated credit for excise duty payment on software was not permissible, initiating proceedings resulting in a demand confirmation and penalty imposition.

2. The appellants argued that an audit objection in 2009 raised concerns about the utilization of accumulated CENVAT credit. A show-cause notice in 2011 proposed treating the credit as lapsed. The Revenue's stance was based on the lack of nexus between input service credit and manufactured goods, emphasizing the need for a bona fide belief in utilizing the credit across different products/services.

3. The Revenue highlighted the Supreme Court's decision in Maruti Suzuki Ltd., asserting that without a nexus between input service and finished goods, credit cannot be availed. However, the Tribunal noted that the utilization occurred before this decision and found no evidence of suppression or mis-declaration by the appellants, considering the unique circumstances of their transition from providing services to manufacturing goods.

4. Ultimately, the Tribunal granted waiver of pre-deposit and stay against recovery during the appeal, acknowledging the prima facie case made by the appellants regarding the limitation period, indicating no necessity to delve into the merits of the case at that stage.