2019 (3) TMI 176 - AT - Central Excise

CENVAT Credit - duty paid on inputs which are used in the manufacture of exempted goods - separate account in respect of inputs, input services which were used in the manufacture of exempted goods not maintained - 6% of the value of the exempted goods as per the provisions of Rule 6(3)(i) of CCR not paid - time limitation - Held that - Revenue has failed to bring on record any material to show that the appellant has suppressed the material fact with intent to evade payment of duty - further, the appellant has been filing the returns regularly wherein they have been showing the availment of credit. The appellant has produced the copies of various returns filed before the Department wherein they have mentioned the cenvat credit availed by them. Further in view of the various decisions relied upon by the appellant, it can be concluded that extended period has wrongly been invoked. The cenvat credit amounting to ₹ 2,58,144/- is hit by limitation and the remaining amount of ₹ 1,50,604/- is within limitation which is confirmed but the entire penalty is dropped. CENVAT credit on input service tax credit of ₹ 2,81,659/- - Held that - The credit was taken during December 2015. Further up to September 2014, the appellant is entitled to take cenvat credit on all the invoices as the said amendment was made applicable from September 2014. Accordingly invoice dated July 2014 and August 2014 amounting to ₹ 1,26,693/- is not time-barred and invoices beyond September 2014 amounting to ₹ 1,54,966/- is confirmed. Interest and penalty - Held that - Since the appellants were having sufficient balance in their cenvat account and they have availed the credit but not utilized the same, the appellants are not liable to pay interest liability. Appeal allowed in part.

Summary

Issues:
1. Availment of cenvat credit on inputs used in the manufacture of exempted goods.
2. Availment of cenvat credit on input services after the expiry of one year from the date of invoice.
3. Applicability of time limit for availing cenvat credit on invoices.
4. Invocation of extended period of limitation.
5. Liability to pay interest on cenvat credit not utilized against excise duty liability.
6. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
1. The appeal challenged an order partially allowing the appeal on the issue of interest while confirming the demand and penalty concerning the availment of cenvat credit on inputs used in manufacturing exempted goods. The appellant failed to maintain separate accounts for such inputs and did not pay the required 6% reversal on the value of exempted goods as per Cenvat Credit Rules, 2004. The Commissioner confirmed the demand and penalty, leading to the appeal.

2. The appellant contested the demand hit by limitation, arguing that the show-cause notice exceeded one year from the relevant period. The appellant claimed no suppression, as they regularly filed returns, disclosing cenvat credit availed. The Tribunal found the extended period wrongly invoked, confirming part of the demand within limitation and dropping the penalty due to regular return filings and disclosed credit availing.

3. Regarding the availed cenvat credit on input services after the expiry of one year from the invoice date, the appellant argued entitlement to credit on invoices predating the time limit amendment in the Cenvat Credit Rules. The Tribunal confirmed credit on invoices pre-amendment and post-amendment within the time limit, relieving the appellant from interest liability based on non-utilization of the credit against excise duty.

4. The Tribunal found insufficient evidence of suppression by the appellant to invoke the extended period of limitation. The appellant's regular return filings and disclosure of availed credit supported the decision to drop the penalty. The Tribunal differentiated between amounts hit by limitation and those within the timeframe, adjusting the confirmation accordingly.

5. The issue of liability to pay interest on cenvat credit not utilized against excise duty liability was resolved in favor of the appellant. Relying on precedent, the Tribunal held the appellant not liable for interest due to the credit not being utilized against excise duty, aligning with the Karnataka High Court judgment cited.

6. The imposition of penalty under Section 11AC of the Central Excise Act, 1944 was dropped by the Tribunal due to the appellant's regular filing of ER-1 returns and the disclosed bona fide credit availing. The Tribunal's decision partially allowed the appeal, addressing the various issues raised by the appellant and the respondent.