2014 (6) TMI 482 - AT - Central Excise

Denial of the Cenvat credit - area based exemption - benefit of Notification No. 33/99, dated 8-7-1999 - Held that - provisions of Rule 12 of Cenvat Credit Rules, 2004 are specific to the fact that any clearance made in terms of Notification No. 33/99-C.E., dated 8-7-1999, which entitles the manufacturer to claim refund of duty paid out of PLA would not be treated as exempted goods and the Cenvat credit on such inputs shall be admissible. Commissioner (Appeals) has not taken note of the said Rule, while directing the deposit of Rs. 20 lakhs. As per the learned advocate, his intention was drawn to the same. As regards endorsement, it stand clarified that same is in respect of VAT paid under Assam Value Added Tax Rules, 2005, which requires an assessee to endorse the said words on the tax invoice. This issue was addressed by the Additional Commissioner having jurisdiction over the appellants factory by writing a letter to the Commissioner, Guwahati in response to the said query, vide his letter dated 2-2-2012 clarified that in compliance of Rule 32 of said Assam Value Added Tax Rules, 2005, duplicate copy of the invoice bear the word this copy does not entitle the holder a tax credit . Inasmuch the said endorsement was in respect of VAT paid in the Assam Laws Added Tax Rules, such endorsement cannot be adopted by the Excise authorities for denial of Cenvat Credit of Excise duty paid on the same. As such, I find that the appellants have a good prima facie case in its favour and no pre-deposit directions should have been made by the Commissioner (Appeals) - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Dismissal of appeals by Commissioner (Appeals) due to non-compliance with stay order.
2. Denial of Cenvat credit based on invoices issued by inputs manufacturer.
3. Direction to deposit Rs. 20 lakhs by Commissioner (Appeals).
4. Interpretation of Rule 12 of Cenvat Credit Rules, 2004.
5. Clarification on the endorsement on invoices.
6. Setting aside the impugned order and remanding the matter.

Analysis:

1. The Commissioner (Appeals) dismissed the appellant's appeals for failing to comply with the stay order, which required a deposit of Rs. 20 lakhs as a condition for hearing the appeal. The dismissal was done without considering the modification application submitted by the appellant, leading to a dispute regarding the compliance with the stay order.

2. The dispute arose from the denial of Cenvat credit to the appellant based on invoices issued by the inputs manufacturer availing an area-based exemption notification. The authorities considered the duty paid by the inputs manufacturer under the exemption notification as refunded, treating the inputs as exempted. This denial led to the confirmation of the demand, interest imposition, and penalty of equal amount on the appellant.

3. The Commissioner (Appeals) directed the appellant to deposit Rs. 20 lakhs, but the appellant argued that Rule 12 of Cenvat Credit Rules, 2004 allows for the admissibility of Cenvat credit on inputs cleared under the exemption notification. The appellant clarified that the endorsement on the invoices regarding tax credit was related to VAT under Assam Value Added Tax Rules and should not affect the Excise duty Cenvat credit eligibility.

4. The judgment highlighted the importance of Rule 12 of Cenvat Credit Rules, 2004, which specifies that clearances under the exemption notification do not render the goods exempted for Cenvat credit purposes. The appellant's case was considered to have a good prima facie standing, and the Commissioner (Appeals) was instructed to decide the appeal on merits without insisting on any pre-deposit, as the appeal was not decided on its merits initially.

5. The issue of the endorsement on the invoices was clarified, indicating that it pertained to VAT under Assam Value Added Tax Rules and should not impact the Cenvat credit eligibility for Excise duty. The clarification from the Additional Commissioner regarding the endorsement further supported the appellant's argument against the denial of Cenvat credit based on the endorsement.

6. Ultimately, the impugned order was set aside, and the matter was remanded to the Commissioner (Appeals) for a decision on the appeal's merits without requiring any pre-deposit, considering the appellant's prima facie case and the misinterpretation of Rule 12 of Cenvat Credit Rules, 2004. The stay petition and appeal were disposed of accordingly.