2017 (4) TMI 746 - AT - Central Excise

CENVAT credit - chassis - denial on the ground that appellant have availed the benefit of N/N. 6/2002 dated 01.03.2002 - Held that - considering the fact that in the appellant s own case, for the earlier period, vide Final Order No. 498-500/08-Ex dated 16.07.2008, this tribunal has held that interpretation of explanation to rule 3 (7) should not lead to a situation of introducing additional condition in the notification i.e. they shall not take credit on any inputs(i.e. all inputs) or forcing them opt for otherwise an optional notification - Rule 3(7) has to be applied only in cases where the exemption notification is on the condition that no input credit on any of the inputs is available - Cenvat credit cannot be denied to the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against OIA denying Cenvat credit on chassis - Interpretation of Rule 3 of Cenvat Credit Rules, 2004 - Applicability of Notification No. 6/2002 dated 01.03.2002 - Benefit of exemption - Denial of credit on all inputs - Double benefits - Application of Rule 3(7) - Consequential relief.

Analysis:

The appellant, engaged in fabricating bus bodies without manufacturing chassis, appealed against the denial of Cenvat credit on chassis in the impugned OIA. The dispute centered around the appellant taking Cenvat credit on duty paid chassis and other inputs used in body building. The Revenue contended that the appellant contravened Rule 3 of Cenvat Credit Rules, 2004, by availing inadmissible credit due to benefiting from Notification No. 6/2002. The demand was upheld, leading to the appellant's appeal.

In a crucial part of the judgment, the Tribunal referred to a previous case involving a similar issue where it was observed that the appellant, as a body building unit, had rightfully taken credit of duty paid on chassis and other inputs. The Tribunal emphasized that the appellant had cleared the body built vehicles by paying duty on the entire value, including the chassis duty, without availing the benefit of the aforementioned notification. It was highlighted that the appellant did not contravene the exemption conditions and was entitled to the Cenvat credit.

The Tribunal delved into the interpretation of Rule 3 of the Cenvat Credit Rules, emphasizing that the term "any inputs" encompassed all inputs. It was elucidated that when an exemption was subject to the condition of not availing Cenvat credit, the assessee should not be permitted to benefit from both the lower duty rate and Cenvat credit simultaneously. Rule 3(7) aimed to prevent such double benefits by denying credit on all inputs when an exemption condition was violated.

Further, the Tribunal clarified that the denial of credit on all inputs was triggered only when an exemption notification mandated the non-availability of credit on any inputs. The interpretation of Rule 3(7) was crucial in ensuring that exemptions were not misused to gain undue advantages. Ultimately, relying on precedents and legal interpretations, the Tribunal allowed the appeal, granting the appellant consequential relief in line with the established principles and legal provisions.

In conclusion, the judgment provided a detailed analysis of the issues surrounding the denial of Cenvat credit on chassis, emphasizing the importance of interpreting exemption notifications and Cenvat credit rules in a manner that prevents the misuse of benefits and ensures compliance with the law. The decision underscored the need for a nuanced understanding of legal provisions to uphold the rights of the appellant while maintaining the integrity of the tax regime.