2018 (7) TMI 605 - AT - Central Excise

CENVAT Credit - Rule 4(1) of CENVAT Credit Rules, 2004 - SSI Exemption - Held that - The assessee is entitled to avail CENVAT credit on inputs, work in progress, when their product became dutiable. Admittedly, after crossing the SSI exemption limit, their product has became taxable. This fact has not been disputed by the Revenue. Therefore, in terms of Rule 3(2) of the said Rule, the assessee is entitled to avail CENVAT credit on inputs but in terms of Rule 4(1) of CENVAT Credit Rules within six months from the said date when the goods become dutiable. The appellants are entitled to avail CENVAT credit - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Appeal against denial of cenvat credit under Rule 4(1) of Cenvat Credit Rules, 2004 due to failure to claim credit within six months of input procurement under SSI exemption. Interpretation of Rule 3(2) allowing credit on inputs when final product becomes taxable.

Analysis:
The appellants appealed against the denial of cenvat credit under Rule 4(1) of the Cenvat Credit Rules, 2004, as they failed to claim the credit within six months of input procurement while under the SSI exemption. The Revenue contended that the appellants were not entitled to avail cenvat credit beyond the stipulated six months. However, the Tribunal analyzed Rule 3(2), which allows manufacturers to claim credit on inputs when their final product becomes taxable. The Tribunal noted that after crossing the SSI exemption limit, the appellants' product became taxable, making them eligible for cenvat credit on inputs. This interpretation was supported by a previous Tribunal case, emphasizing the importance of not rendering Rule 3(2) ineffective by strict adherence to Rule 4(1). The Tribunal stressed the need for a harmonious interpretation of both rules to uphold the substantive rights of the assessee.

The Tribunal concluded that the appellants were indeed entitled to avail cenvat credit despite the Revenue's objections. By applying the principles of harmonious construction and interpretation of rules, the Tribunal held that the appellants' right to claim credit upon exiting the exemption scheme could not be restricted by Rule 4(1) of the Cenvat Credit Rules. Consequently, the impugned orders denying cenvat credit were set aside, and both appeals were allowed with consequential relief. The Tribunal's decision was based on the substantive rights provided by the law, ensuring that the appellants could rightfully claim the cenvat credit upon becoming taxable, even if it exceeded the six-month limit from input procurement.