2023 (3) TMI 232 - HC - Central Excise

CENVAT Credit - inputs in stock, in process or inputs contained in their final products and required to have been paid before effecting clearance under Notification No.60/2003- CE dated 29.07.2003 under Rule 12 of the Cenvat Credit Rules, 2002 - invocation of extended period of limitation u/s 11A(1) - HELD THAT - The CENVAT credit had been taken by the respondent-department when the final products were exigible to duty. It was availed on inputs till the date of exemption vested in assessee. The respondent could not be divested of that credit as there was no statutory provision to do so. The right to avail credit is indefeasible and there cannot be stated to be any co-relation between the raw material and the final product; that is say, it is not as if the credit could be taken only on final product that was manufactured due to the particular raw material to which the credit was related. It is nobody's case that credit of duty on inputs was taken by the respondent illegally or irregularly. The subsequent exemption of final products manufactured by the respondent from excise duty did not make the respondent assessee liable to reverse the cenvat credit availed as the same was given to it on the date when the final product was not exempted. The respondent was certainly entitled to benefit of cenvat credit in the obtaining circumstances of the case and, therefore, the question of payment of any interest or penalty by the respondent or its officers did not arise. The substantial questions of law are answered accordingly in favour of the respondent and against the appellant. Appeal dismissed.

Summary

Issues:
Appeal under Section 35-G of the Central Excise Act, 1944 against Tribunal's order; Alleged evasion of tax by respondent; Demand raised by assessing authority; Tribunal's order setting aside demand, interest, and penalty; Substantial questions of law framed; Appellant's argument against Tribunal's order; Respondent's defense based on legal precedents; Tribunal's decision upheld.

Detailed Analysis:

1. Background of the Case:
The appeal was filed under Section 35-G of the Central Excise Act, 1944 against the order dated 12.08.2015 passed by the Tribunal. The respondent company, engaged in manufacturing ceramic tiles, was paying duty at different rates and availing cenvat credit. The department found discrepancies in the respondent's duty payments, leading to a demand of Rs.21,32,778/- and penalties being imposed.

2. Appellant's Grounds for Appeal:
The appellant-revenue contended that the respondent had evaded tax by not complying with the conditions of amended notifications and Rules, 2002. The appellant argued that the Tribunal erred in setting aside the demand, interest, and penalty imposed on the respondent.

3. Substantial Questions of Law:
Three substantial questions of law were framed, focusing on the Tribunal's decisions regarding the demand amount, interest, and penalties imposed on the respondent. The legality of the Tribunal's actions in setting aside these aspects was under scrutiny.

4. Appellant's Argument:
The appellant's counsel argued that the Tribunal's decision was erroneous as the respondent had not followed the conditions prescribed under the relevant notifications and Rules, 2002. The appellant contended that the respondent was not entitled to cenvat credit without fulfilling the necessary requirements.

5. Respondent's Defense:
The respondent's counsel defended the Tribunal's decision, stating that the respondent had legally availed the cenvat credit when the final products were dutiable. Citing legal precedents, the respondent argued that once the credit was validly taken, it could not be reversed due to subsequent exemptions on final products.

6. Tribunal's Decision Upheld:
After considering the arguments and legal precedents cited, the Court upheld the Tribunal's decision. It was concluded that the respondent was entitled to the cenvat credit as per the prevailing circumstances, and thus, the demand, interest, and penalties were set aside in favor of the respondent.

7. Final Verdict:
The Court dismissed the appeal filed by the revenue, stating that there was no merit in the arguments presented. The Tribunal's decision was upheld, and the appeal was consequently rejected.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the case, arguments presented by both parties, the Tribunal's decision, and the final verdict of the Court.