2017 (8) TMI 515 - AT - Central Excise

SSI exemption - N/N. 8/2003 dated 1.3.2003 - CENVAT credit - department observed that during the month of August 2005, they have taken credit of duty received and used in the manufacture of final products during the year 2004-05 with a remark that these credit were not taken at the relevant period - Rule 11 (2) of the CCR - Held that - the credit pertaining to year 2004-05 cannot be taken in year 2005-06 as the same lapses in the event of appellant s option to avail SSI exemption from the very beginning. During 2005-06 also once the appellants crosses exemption limit they can only take credit of inputs lying in stock or in process or contained in final product lying in stock on the date they started paying duty. In the present case, related inputs were admittedly received and used during 2004-05 itself. It is not the appellant s case that inputs were still lying in stock one way or the other when they graduated to payment of duty during 2005-06. The appellants have also argued that there is no time limit for taking CENVAT credit. I find that this right of the appellants can be allowed to be exercised to the extent such exercise is not inconsistent with provisions of Rule 11(2) and 3(2) of CENVAT Credit Rules, 2004. In the present situation, availment of credit as claimed by the appellants shall infringe on the operation of Rule 11(2) as well as Rule 3(2). Appeal dismissed - decided against appellant.

Summary

Issues:
Appeal against rejection of exemption availed under Notification No.8/2003 for manufacturers of paints under Chapter 32 of Central Excise Tariff Act, 1985. Disallowance and demand of wrongly taken CENVAT credit along with interest and penalties under Rule 15 of CENVAT Credit Rules, 2004.

Analysis:
The appeal challenged the order rejecting the appellant's claim for exemption under Notification No.8/2003 as manufacturers of paints. The appellants crossed the exemption limit during July 2005, leading to the payment of full duty and availing credit on inputs. The dispute arose when the department observed credit taken during August 2005 for inputs received in the previous year, 2004-05. The adjudicating authority disallowed the credit of &8377; 39,325/-, imposed interest, and penalty under Rule 15 of CENVAT Credit Rules, 2004. The Commissioner (A) upheld this decision, prompting the present appeal.

The appellant contended that the impugned order was legally unsustainable, emphasizing the eligibility to avail credit on inputs received while paying duty on final products. They argued that the credit was availed in the subsequent financial year due to oversight, with no time limit specified under CCR for credit availment. Legal precedents were cited to support this argument. Additionally, they asserted that the credit, once eligible, could be utilized at any time during duty payment, citing relevant case law.

On the contrary, the learned AR defended the impugned order, citing Rule 11(2) of CCR, 2004. Referring to a Tribunal's decision on a similar issue, the AR supported the Commissioner (A)'s decision. After considering both parties' submissions and the record, the Tribunal found that the appellant violated Rule 11(2) of CCR. The Commissioner (A)'s reasoning, highlighted in the order, emphasized that the credit pertaining to the previous year lapsed due to opting for SSI exemption, making its availment in the subsequent year impermissible. The tribunal concurred with the Commissioner (A)'s decision, upholding the rejection of the appellant's appeal.

In conclusion, the Tribunal upheld the impugned order, dismissing the appellant's appeal based on the Commissioner (A)'s findings and the precedent set by a previous Tribunal decision on a similar issue. The decision was based on the violation of Rule 11(2) of CCR, 2004, and the inadmissibility of credit availment in the subsequent year due to lapsing provisions linked to opting for SSI exemption.

End of Analysis