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2018 (1) TMI 484 - AT - Central ExciseCENVAT credit - case of respondent is that the credit was available to them prior to amendment in Rule 7(d) of the CCR, 2004 and therefore they cannot be asked to follow the said Rule 7(d) - Section 38A of the Central Excise Act - Held that - the said rule permits distribution of cenvat credit. Any duty paid by the assessee does not automatically become cenvat credit. Any duty paid by the assessee which qualifies the test of Rule 3 of the CCR, 2004 can become cenvat credit when the same is availed by the assessee as cenvat credit - In any case Uni Deritend Ltd. has availed the credit of duty paid by them after the amendment and thus the law as it existed at the time when they converted the duty paid by them into cenvat credit would be the law applicable to the said credit, since at the time of availing cenvat credit, sub-rule (d) of Rule 7 and Explanation 3 of the said rule was in existence at the time of availing credit. Uni Deritend Ltd. was required to follow the same and avail the credit only in terms of Rule 7(d) read with Explanation 3 - demand of reversal of credit upheld. Penalty - Held that - since the demand of duty under Section 11A(4) of the Central Excise Act, 1944 is upheld, the assessee is liable to mandatory penal provisions of Section 11AC of the Central Excise Act, 1944 - penalty upheld. Appeal allowed - decided in favor of Revenue.
Issues:
- Distribution of Cenvat credit among multiple units - Interpretation of Rule 7(d) of the Cenvat Credit Rules - Applicability of Section 38A of the Central Excise Act - Imposition of penalty under Section 11AC of the Central Excise Act Distribution of Cenvat credit among multiple units: The case involved appeals by both the Revenue and M/s. Uni Deritend Ltd. regarding the distribution of Cenvat credit of input services among their units. Uni Deritend Ltd. argued that the credit was availed only at one unit, Thane, despite being common to all units. The demand for distribution of credit to all units was confirmed by the original adjudicating authority and upheld by the Commissioner (Appeals). Uni Deritend Ltd. contended that the credit accrued prior to the amendment to Rule 7(d) of the Cenvat Credit Rules, allowing them to distribute the credit as per the rules existing before the amendment. However, the Tribunal held that the credit must be availed in accordance with the rule in force at the time of availing, which in this case was Rule 7(d) read with Explanation 3. The demand for reversal of credit was upheld based on this interpretation. Interpretation of Rule 7(d) of the Cenvat Credit Rules: The Tribunal analyzed Rule 7(d) of the Cenvat Credit Rules, which allows for the distribution of Cenvat credit among units based on turnover. It noted that any duty paid does not automatically become Cenvat credit; it must meet the criteria of the Cenvat Credit Rules and be claimed as credit. Uni Deritend Ltd.'s argument that the credit was available prior to the rule amendment was deemed doubtful as there was no evidence of payment before the amendment. The Tribunal emphasized that the law applicable at the time of availing the credit governs, and Uni Deritend Ltd. was required to follow Rule 7(d) and Explanation 3 at the time of availing the credit, leading to the upheld demand for credit reversal. Applicability of Section 38A of the Central Excise Act: Uni Deritend Ltd. relied on Section 38A of the Central Excise Act and a Supreme Court decision to support their argument that the credit accrued to them before the rule amendment should not be denied. However, the Tribunal held that the law in force at the time of availing the credit prevails, and Uni Deritend Ltd. was obligated to comply with Rule 7(d) and Explanation 3 during credit availing, dismissing the appeal. Imposition of penalty under Section 11AC of the Central Excise Act: Regarding the penalty under Section 11AC of the Central Excise Act, the Revenue argued that since the demand for duty was upheld, the penalty provisions apply. The Tribunal agreed, stating that Rule 7(d) was clear and unambiguous, leaving no room for interpretation. Consequently, the imposition of the penalty was deemed justifiable, and the appeal of Uni Deritend Ltd. was dismissed while the appeal of Revenue was allowed.
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