2017 (1) TMI 650 - AT - Central Excise

CENVAT credit - Payment of duty on non-excisable goods - demand of differential amount between CENVAT credit taken on MS wire and the 8% paid by them on MS wire made out of duty-paid MS wire. - the contention of assessee that MS wires are not non-excisable goods that with acceptance of duty of 8% there is no scope for denial of credit, that bulk of their production is manufactured out of wire rods and that denial of CENVAT credit is contrary to the said Rules, is justified? - Held that - The scheme of CENVAT credit is erected on the foundation that there is a last person in the chain of trade and commerce who is required to be saddled with the burden of duty without being able to claim any set-off. Such person is the ultimate consumer of the product. The privilege that accompanies payment of specified tax or duty on exempted goods or services under CENVAT Credit Rules, 2004 is intended to ensure that convenience is afforded to manufacturers or service providers who may, owing to some exemption that they may not be interested in claiming, be, yet, compelled to implement administrative measures of separate accounts that are be too cumbersome. On non-excisable goods, the purchaser is not denied the option of paying duty. Consequently, appellant has rightly been denied the facility of payment of the deemed tax/duty to avail CENVAT credit. Extended period of limitation - Held that - The communication from appellant to the Range on 22nd September 2000 and the direction of the Range to appellant in letter dated 14th December 2001 is claimed as support for this contention made on behalf of appellant. Neither the original authority nor the first appellate authority have considered this aspect and have not rendered a finding on the allegation of deliberate suppression of facts with intent to evade duty even though the claim of limitation was raised in response to the notice - recovery is hit by limitation in section 11A of Central Excise Act, 1944. Appeal allowed on the ground of period of limitation - decided in favor of appellant.

Summary

Issues:
1. Availment of CENVAT credit on MS wire for altering gauge before clearance.
2. Duty demand under CENVAT Credit Rules, 2002.
3. Denial of CENVAT credit and imposition of penalties.
4. Interpretation of exempt goods under CENVAT Credit Rules.
5. Applicability of excisable goods in the definition of exempt goods.
6. Scheme of CENVAT credit and burden of duty.
7. Facility of payment of tax on exempted goods.
8. Allegation of suppression of facts to evade duty.
9. Limitation under section 11A of Central Excise Act, 1944.

Analysis:
1. The case involves the appellant-assessee availing CENVAT credit on MS wire for altering gauge before clearance, leading to duty demand under CENVAT Credit Rules, 2002. The appellant maintained separate accounts initially but faced logistical issues, resulting in the obligation to discharge duty liability on exempt goods at 8%. The dispute centered around the classification of goods and the applicability of duties of Central Excise.

2. The appellant contended that their re-drawn MS wires were not non-excisable goods and that denial of CENVAT credit was contrary to the Rules and judicial decisions. The argument also highlighted the classification of wire rods as wires under the Rules, emphasizing the changes brought about by the CENVAT Credit Rules, 2004.

3. The Tribunal analyzed the definition of exempt goods under the CENVAT Credit Rules, particularly focusing on the inclusion of excisable goods in the definition. The judgment clarified that exempt goods encompass those exempt from excise duty, emphasizing the legislative intent behind the Rules and the evolution of the qualifying expression "excisable" in subsequent amendments.

4. The judgment delved into the scheme of CENVAT credit, emphasizing the burden of duty on the ultimate consumer and the purpose of the facility of payment of tax on exempted goods. It highlighted the importance of preventing the re-entry of duty-paid goods into the value chain to ensure the recovery of legislated duties.

5. The Tribunal addressed the appellant's argument regarding the alleged suppression of facts to evade duty, emphasizing the requirement for a finding on deliberate suppression by the authorities. The judgment concluded that the recovery was barred by limitation under section 11A of the Central Excise Act, 1944 due to the lack of a finding on deliberate suppression, leading to the setting aside of the impugned order.

6. Ultimately, the appeals were allowed, and the judgment was pronounced in court on 19/12/2016, providing a comprehensive analysis of the issues surrounding the availment of CENVAT credit, duty demands, denial of credit, interpretation of exempt goods, and the limitation under the Central Excise Act, 1944.