2015 (10) TMI 100 - AT - Central Excise

Waiver of pre deposit - Rate of duty @1% subject to non-availment of cenvat credit - Notification no/ 1/2011 - appellants submitted that they had not taken credit of duty paid on inputs or tax paid on services at all. What they had done was, they had accumulated Cenvat credit in their books which had arisen as a result of export of Caprolactum, a dutiable product. - Held that - According to Notification No. 1/2011, the proviso to the introductory paragraph provided that nothing contained in this Notification shall apply to the goods in respect of which credit of duty on inputs or tax on input services has been taken under the provisions of Cenvat Credit Rules, 2004. Therefore we find considerable force in the arguments advanced by the learned counsel that proviso in the Notification does not bar payment of duty by utilizing Cenvat credit available in the books. Only if the credit of duty/tax paid on inputs or input services is taken, the benefit of the Notification would not be available. It was a categorical submission on behalf of the appellant that they have not taken such credit. There is no finding in the impugned order also that appellants have taken such credit. Nevertheless, the Notification cannot be read in isolation. Availment and utilization of Cenvat credit on inputs and input services is regulated by Cenvat Credit Rules and whether it is taking the credit or utilizing the same it has to be in accordance with the provisions of Cenvat Credit Rules. In the hierarchy of statutory provisions, the Notification is one rung below the Rules and therefore the Notification has to be read with the Rules and cannot be read in isolation. In view of the discussion, the appellant clearly does not have a case prima facie on merits. - Partial stay granted.

Summary

Issues:
1. Interpretation of Notification No. 1/2011-C.E. regarding duty payment for fertilizers.
2. Utilization of Cenvat credit for payment of duty.
3. Applicability of Cenvat Credit Rules in relation to duty payment.
4. Comparison with legal precedents cited by the appellant.

Issue 1: Interpretation of Notification No. 1/2011-C.E.:
The case involved M/s. Fertilizers and Chemicals Travancore Ltd. manufacturing fertilizers and chemicals. The dispute arose regarding the duty rate applicable to Ammonium Sulphate cleared as fertilizer products following the withdrawal of exemption and introduction of a concessional rate of duty. The appellant contended they had not taken credit of duty paid on inputs or services but had accumulated Cenvat credit from the export of Caprolactum. The central issue was the interpretation of the proviso to Notification No. 1/2011-C.E., which stated that the benefit of the Notification would not apply if credit of duty on inputs or tax on input services had been taken under Cenvat Credit Rules, 2004.

Issue 2: Utilization of Cenvat credit for duty payment:
The appellant argued that they had not taken credit of duty paid on inputs or services but had accumulated Cenvat credit, which they believed could be utilized for duty payment. The Revenue contended that the appellant's procedure was incorrect, citing Rule-3 of Cenvat Credit Rules, which prohibited the utilization of Cenvat credit for goods benefiting from the exemption under Notification No. 1/2011-C.E. The Tribunal found merit in the appellant's argument that the proviso in the Notification did not bar payment of duty by utilizing available Cenvat credit unless credit of duty/tax paid on inputs or services was taken.

Issue 3: Applicability of Cenvat Credit Rules:
The Tribunal emphasized that the Notification had to be read in conjunction with the Cenvat Credit Rules, highlighting that no payment of duty could be made by utilizing Cenvat credit on goods benefiting from the exemption under Notification No. 1/2011-C.E. The Tribunal clarified that the Rules took precedence over the Notification, and any utilization of Cenvat credit for such goods mandated a duty payment at 5%.

Issue 4: Comparison with legal precedents:
The Tribunal analyzed legal precedents cited by the appellant, including Eicher Motors Ltd., Ranbaxy Laboratories Ltd., and Kribhco Shyam Fertilizers Ltd. The Tribunal differentiated the facts of these cases from the present situation, emphasizing that the appellant did not have a strong case based on the cited precedents. The Tribunal provided an alternative for the appellant to choose between utilizing Cenvat credit or reversing it with interest for duty payment, allowing flexibility in compliance.

In conclusion, the Tribunal's judgment clarified the interpretation of Notification No. 1/2011-C.E., the utilization of Cenvat credit for duty payment, the significance of Cenvat Credit Rules, and the comparison with legal precedents, providing a comprehensive analysis of the issues involved in the case.