2018 (10) TMI 756 - AT - Central Excise

CENVAT Credit - area based exemption availed - credit denied on the ground that in terms of Rule 12 of Cenvat Credit Rules, 2004, the Cenvat credit of duty paid by units availing the benefit of Notification No.1/2010 was allowed only after the amendment of This rule w.e.f. 20.01.2014 - Held that - The availment under Notification No.1/2010 is in dispute which is yet to be settled. However, the alternate plea that they would have been entitled to Notification No.56/2002 upto 05.09.2014 appears to have been considered and permitted by the jurisdictional Central Excise authorities. If that is so, then there will be no justification to deny the Cenvat credit availed by the appellant on goods received from M/s Ritzy Polymers. There will be no justification to deny the Cenvat credit availed by the appellant on goods received from M/s Ritzy Polymers - matter remanded to the adjudicating authority for passing de novo orders after verifying whether M/s Ritzy Polymers have been permitted to avail benefit of Notification no. 56/2002 during the period under dispute - appeal allowed by way of remand.

Summary

Issues:
- Availment of Cenvat credit on goods procured from a supplier availing area-based exemption.
- Denial of Cenvat credit by the department based on Rule 12 of Cenvat Credit Rules, 2004.
- Dispute regarding the retrospective applicability of an amendment to Rule 12.
- Justification for reversal of Cenvat credit and imposition of penalty.

Analysis:
1. Availment of Cenvat credit on goods procured from a supplier availing area-based exemption:
The appellant, engaged in manufacturing PVC compounds, availed Cenvat credit on goods procured from a supplier benefiting from area-based exemptions. The supplier, M/s Ritzy Polymers, transitioned from an old exemption to a new one before the expiry of the original exemption period, leading to a dispute regarding the Cenvat credit availed by the appellant.

2. Denial of Cenvat credit based on Rule 12 of Cenvat Credit Rules, 2004:
The department denied the Cenvat credit amounting to a significant sum on goods procured from M/s Ritzy Polymers, citing Rule 12 of Cenvat Credit Rules, 2004. The denial was grounded on the argument that the Cenvat credit was allowed only after the amendment of Rule 12, effective from a specific date.

3. Dispute regarding the retrospective applicability of an amendment to Rule 12:
The appellant argued that the amendment to Rule 12, which rectified an omission related to the exemption Notification, should be considered as having retrospective applicability. The department, however, contended that without express provisions in the notification, the amendment could not be presumed to have retrospective effect, citing relevant case law to support their position.

4. Justification for reversal of Cenvat credit and imposition of penalty:
After hearing both sides and reviewing the records, the Tribunal found that the demand for reversal of Cenvat credit was closely linked to the proceedings against the supplier, M/s Ritzy Polymers. The Tribunal noted that if M/s Ritzy Polymers had been permitted to avail the benefit of the old exemption during the disputed period, there would be no basis to deny the Cenvat credit availed by the appellant. Consequently, the Tribunal set aside the impugned order, remanding the matter to the adjudicating authority for a fresh decision, and concluded that there was no justification for imposing a penalty.

This detailed analysis of the judgment highlights the key issues of the case, arguments presented by both parties, and the Tribunal's decision, providing a comprehensive overview of the legal aspects involved in the matter.