2018 (11) TMI 614 - AT - Central Excise

CENVAT credit - inputs purchased from a unit of manufacturer falling in the notified order of Area Based Exemption - N/N. 56/2002 dated 6.9.2004 or N/N. 1/2010-CE dated 06.12.2010 - Rule 12 of CCR 2004 - Time Limitation. Held that - The provisions of Cenvat Credit Rules provide that the credit of duty paid on the inputs is available to the manufacturer of such duty paid inputs and find a use in the manufacture appellants final products. The provisions of Rule 3 of Cenvat Credit Rules, 2004 have no ambiguity on this aspect - once the duty has been paid on the legitimately purchased inputs, the appellants are very much entitled for availing credit of the same and it will not make any difference whether the goods have been procured from a unit which is based in area-based exemption or otherwise. Provisions of Rule 12 of Cenvat Credit Rules, 2004 allow the benefit of Cenvat credit to the down-stream buyers of the inputs inspite of the facts that the manufacturer based in Area Based Exemption Notification will be entitled for a refund of part of duty paid by him on such clearances - Commissioner (Appeals) has wrongly interpreted the provision of Rule 12 of Cenvat Credit Rules, 2004 and Rule 12 does not debar the down-stream buyers of the inputs cleared from the area based exemption from availing the Cenvat credit of the duty which have been paid by them at the time of purchase of such inputs. Time Limitation - Held that - There is no ground of invoking extended time proviso under Rule 14 of Cenvat Credit Rules, 2004 as necessary ingredients for invoking extended period of demand are not present in their case - demand is barred by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Entitlement to avail Cenvat credit on duty paid inputs from a manufacturer under specific notifications.
2. Interpretation of Rule 12 of Cenvat Credit Rules regarding availing Cenvat credit for duty paid inputs.
3. Denial of Cenvat credit in the given circumstances.
4. Applicability of the period of limitation on the demand.

Analysis:
1. The case involved the appellant, a manufacturer of PVC components, purchasing raw materials like DOP & DBP from M/s Ritzy Polymers, benefiting from Area Based Exemption Notification No.56/2002-CE. The dispute arose due to the introduction of Notification No.01/2010-CE, affecting the Cenvat credit availed by the appellant.

2. The department contended that Cenvat credit on duty paid goods from M/s Ritzy Polymers was not permissible due to Notification No.1/2010-CE not being incorporated in Rule 12 of Cenvat Credit Rules until 2014. The appellant argued that since M/s Ritzy Polymers was eligible for exemption under Notification No.56/2002 until 2014, they were entitled to Cenvat credit.

3. The appellant maintained that they rightfully availed Cenvat credit on duty paid inputs as per Rule 3 of Cenvat Credit Rules, emphasizing that the source of inputs did not affect their eligibility. They cited a similar case where the Tribunal remanded the matter to verify the supplier's benefit under the relevant notifications.

4. The Tribunal found that the appellants lawfully purchased duty paid inputs and were entitled to Cenvat credit under Rule 3. Rule 12 did not disqualify downstream buyers from availing credit, even if the manufacturer enjoyed an exemption. The Tribunal upheld the appellant's claim, noting that the demand was time-barred and set aside the impugned order.

Conclusion:
The Tribunal ruled in favor of the appellant, allowing them to avail Cenvat credit on duty paid inputs purchased from M/s Ritzy Polymers despite the supplier's exemption status. The decision emphasized the applicability of Rule 3 over Rule 12 in determining Cenvat credit eligibility, ultimately rejecting the department's demand due to the bar of limitation.