2020 (12) TMI 810 - AT - Central Excise

Reversal of CENVAT Credit - certain activities carried out by it on imported China pipes and cleared after making payment of excise duty - process amounting to manufacture or trading of goods - Rule 6(3) of the CCR, 2004 - time limitation - HELD THAT - The issue is no longer res integra after the judgment of the Tribunal in the case of SUYASH AUTO-PRESS COMPONENTS ASSEMBLIES P. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III 2018 (5) TMI 208 - CESTAT MUMBAI where it was held that the removal of input under Rule 3(5) was made admittedly on payment of duty. Therefore, there is no case of trading activity which is an exempted service. Accordingly, there is no application of Rule 6(3) of the Cenvat Credit Rules, 2004. In the instant case of the Appellant also, there is no dispute that the goods where cleared after payment of excise duty and thus once the duty has been paid on such goods and accepted by the department, the same cannot be treated as a trading activity to trigger the mis chive under Rule 6(3) of the CCR, 2004. Extended period of limitation - HELD THAT - Further, it is also on record that the Appellant s activities were known to the department since inception as earlier also a SCN dated 01/04/2015 was served on the Appellants for recovery of Cenvat credit availed on imported china pipes which were cleared after payment of duty. Thus, the current proceedings are on the same foot. By treating the activities of the Appellant as trading of goods cannot be sustained by invoking extended period of limitation as the department was very well in knowledge of the entire proceedings since inception. Thus, the demand cannot sustain on limitation ground as well. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmation of demand of irregular Cenvat credit under Rule 6(3) of Cenvat Credit Rules, 2004 along with applicable interest and equivalent penalty.

Analysis:
The appellant, engaged in manufacturing activities, faced a demand of irregular Cenvat credit based on an EA 2000 audit. The Show Cause Notice (SCN) alleged that the appellant engaged in trading activities without maintaining separate books of accounts for common input services, necessitating reversal under Rule 6 of the Cenvat Credit Rules, 2004. The Order-in-Original confirmed the demand and imposed a penalty, upheld by the Commissioner (Appeals), leading to the current appeal before the Tribunal.

The appellant argued that the current SCN was an afterthought as a previous SCN had already addressed the issue of Cenvat credit on imported pipes. The appellant contended that the goods had already paid excise duty during the removal process, making the demand for reversal under Rule 6 unjustified. The appellant cited relevant judgments to support their case.

The main issue was whether the appellant was liable to reverse the demanded amount under Rule 6(3) of the CCR, 2004 for activities on imported pipes. The Tribunal referenced a previous judgment to determine that since the goods were cleared after payment of excise duty, they could not be considered as trading activities triggering Rule 6(3). The Tribunal held that once duty was paid and accepted by the department, the activities could not be treated as trading, thereby setting aside the impugned order.

Additionally, the Tribunal noted that the department was aware of the appellant's activities since a previous SCN in 2015, rendering the current proceedings invoking the extended period of limitation unsustainable. The demand could not be sustained on limitation grounds due to the department's prior knowledge of the appellant's activities. Consequently, the appeal was disposed of in favor of the appellant with consequential benefits, if any.