2018 (9) TMI 564 - AT - Central Excise

CENVAT Credit - whether the appellant is eligible to avail CENVAT credit of the service tax paid by him on Royalty charges paid to M/s Solute? - time limitation. Held that - The show cause notice issued in September, 2015 is blatantly time barred. Hence the entire demand raised on the appellant needs to be set aside on the question of limitation itself. Appeal allowed.

Summary

Issues:
1. Eligibility of CENVAT credit on service tax paid for Royalty charges.
2. Contention on limitation regarding the availed CENVAT credit.
3. Bonafide belief of the appellant in availing the CENVAT credit.
4. Discharge of Central Excise Duty as a deemed manufacturer.
5. Time-barred show cause notice issued in September 2015.

Issue 1: Eligibility of CENVAT credit on service tax for Royalty charges:
The appellant, engaged in manufacturing paper quality products, procured technology from M/s Solute and paid Royalty charges. They lacked manufacturing facilities and got finished goods manufactured by M/s Srivilas using the technology. The appellant re-packed and re-labelled the goods and paid Central Excise Duty as a deemed manufacturer. The Tribunal found the appellant eligible to avail CENVAT credit on the service tax paid for Royalty charges as it was used in the manufacture of final products. The appellant's bonafide belief in eligibility was supported by declaring the credit in monthly returns, and the revenue authorities did not contest the payment of service tax. The Tribunal held the appellant's actions were not with an intent to evade duty.

Issue 2: Contention on limitation of availed CENVAT credit:
The appellant raised a contention on the limitation period, arguing that the show cause notice issued in September 2015 was time-barred. The Tribunal agreed with the appellant, stating that the notice was indeed time-barred as the appellant had availed the credit in 2011-2013 and informed the authorities through monthly returns. Consequently, the entire demand raised on the appellant was set aside based on the limitation issue.

Issue 3: Bonafide belief of the appellant in availing CENVAT credit:
The Tribunal acknowledged the appellant's bonafide belief in availing the CENVAT credit on service tax paid for Royalty charges. The appellant's actions were considered genuine as they declared the credit to authorities and there was no contest from revenue authorities regarding the payment of service tax. The Tribunal found no evidence of misstatement or suppression of facts by the appellant, supporting their bonafide belief in the eligibility of the credit.

Issue 4: Discharge of Central Excise Duty as a deemed manufacturer:
The appellant, deemed manufacturer under Chapter Note 10 of the Central Excise Tariff Act, re-packed and re-labelled goods procured from other manufacturers. They discharged Central Excise Duty as required for the re-packed and re-labelled goods. The Tribunal recognized the appellant's compliance with duty payment obligations as a deemed manufacturer in the process of re-packing and re-labelling the goods.

Issue 5: Time-barred show cause notice issued in September 2015:
The Tribunal emphasized that the show cause notice issued in September 2015 was time-barred due to the appellant's timely declaration of availed CENVAT credit in the monthly returns filed for the years 2011-2013. As a result, the entire demand raised on the appellant was set aside solely on the grounds of limitation. No other findings were recorded by the Tribunal due to the decision on the limitation issue.

In conclusion, the Tribunal set aside the impugned order based on the limitation issue, allowing the appeal in favor of the appellant. The judgment highlighted the appellant's eligibility to avail CENVAT credit on service tax paid for Royalty charges, their bonafide belief in the credit's validity, compliance with Central Excise Duty obligations as a deemed manufacturer, and the time-barred nature of the show cause notice issued in September 2015.