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2024 (9) TMI 238 - AT - Central ExciseCENVAT Credit - brand promotion services - invoices addressed to head office/corp. office - inputs contained in semi-finished goods - inputs contained in final product lying in stock - returned goods - Interest and penalty under Rule 14 and Rule 15 of the CCR respectively. Where there is a difference of opinion between the Appellant-Assessee and the adjudicating authority, is with regard to consumption of inputs involving CENVAT credit amount of Rs.6,25,651/-? - HELD THAT - The allegation of the Department in the report and in the impugned order is merely on the basis of an apprehension or a suspicion that the Assessee could not have consumed so much inputs in a single day. This allegation has been made without any corroborative evidence on the part of the department. It is a settled law that suspicion however strong, cannot take the place of evidence - the Department has not submitted any evidence to the contrary. Accordingly, there is no substance in the allegation of the Department that all those inputs are consumed in a single day. This is evident from the stock register maintained in RG-23A Part-I which forms part of RUD-3 to the Show Cause Notice dated 27.02.2014. Accordingly, we hold that the CENVAT Credit of Rs.6,25,651/-availed by the Appellant-Assessee cannot be denied on this ground. Thus, we set aside the demand confirmed in the impugned order on this count. Difference of opinion in the report dated 06.08.2024 is with respect to returned goods involving CENVAT Credit of Rs.5,14,168/- - HELD THAT - The Appellant-Assessee entered such returned goods in their finished goods stock records. However, for the purpose of control, they have also recorded the factum of receipt back of cleared goods in a separate register. Merely relying on such recording of these goods in separate register, the Department assumed that the inventory of these products was separately maintained without physically verifying the same or even checking the accounting of finished goods stock. A bare look at the goods return register would have revealed that these goods were received back during the period November 2011 to June 2012. There would be no rationale to keep these goods in stock separately up to 28.02.2013. Thus, the demand of reversal of CENVAT credit of Rs.5,14,168/-is not warranted - the demand confirmed in the impugned order on this count. CENVAT Credit on brand promotion services - HELD THAT - CENVAT credit of Rs. 89,61,000/- on brand promotion services provided by 2 IPL franchises was availed by the Appellant-Assessee on 25.02.2013, i.e., before 01.03.2013, when the final product manufactured by the Appellant-Assessee was dutiable - Rule 6 of the CCR cannot be invoked in this case to deny CENVAT Credit on input service which was rightly taken when the final product was chargeable to duty. It is to be noted that Rule 6 is applicable only in cases where the assessee is manufacturing both dutiable as well as exempted products. It is not applicable where the input/ input service is used in the manufacture of final product, which is exempted subsequently. Rule 11(3) which was inserted on 01.03.2007 under the CENVAT Credit Rules, mandated the manufacturer to pay an amount equivalent to the CENVAT credit taken in respect of inputs received for use in the manufacture of the final product, which is lying in stock or contained in the final products, if the final products become exempted subsequently. We observe that Rule 11(3) is only restricted to inputs and there is no provision which requires paying of an amount in respect of input services - CENVAT credit availed on input services before the final product became exempt cannot be denied to the Appellant. Regarding the appeal filed by the Revenue against allowing CENVAT credit to the tune of Rs.26,70,004/-, it is observed that there is no dispute regarding receipt and utilization of the inputs or input services by the Appellant-Assessee in the factory. The objections raised by the Department in the Notice are procedural in nature. It is the settled position of law that substantive benefit of CENVAT Credit cannot be denied for mere procedural lapse of mentioning incorrect/not proper address in the invoice issued by the service provider - as per proviso to Rule 9(2) of the CCR, address of service recipient is not a mandatory requirement; hence CENVAT credit cannot be denied on this ground - the ld. adjudicating authority has rightly allowed the credit of Rs.26,70.004/- For the same reason, the confirmation of demand of Rs.14,962/- in the impugned order is not sustainable. Hence, the Revenue s appeal on this issue is dismissed. Time Limitation - HELD THAT - The fact of availment of CENVAT credit was duly reflected in the periodical returns (ER-1) filed by the Appellant-Assessee. Thus, there is no evidence of suppression of fact with intention to evade the payment of tax established in this case. In absence of any such evidence of suppression of fact, thus raising of demand by invoking of extended period of limitation is not sustainable - This view has been held in the case ofPr. Commissioner vs. Himadri Speciality Chemical Ltd. 2022 (9) TMI 1213 - CALCUTTA HIGH COURT wherein it has been held that if availment of credit shown in ER-1 return filed with Department, then five years extended period of demand cannot be invoked - the entire demand confirmed vide impugned order dated 20.08.2015 is legally unsustainable on the grounds of limitation. Demand of interest on the payment/reversal of CENVAT Credit - HELD THAT - Rule 14 of the CCR has been invoked to levy interest on the amount to be recovered under Rule 11(3)(ii) of the CCR. As per Rule 14(2), if CENVAT credit is taken and wrongly utilized, only then can interest be levied. An amount determined under Rule 11(3)(ii) of the CCR cannot be termed as CENVAT credit taken and wrongly utilized. Hence, Rule 14 cannot be invoked in this case to levy interest while recovering an amount under Rule 11(3) of the CCR. Penalty imposed on the Appellant-Assessee - HELD THAT - Penalty under Rule 15 can be imposed only when CENVAT credit taken is wrongly utilized in contravention of any provision of the Central Excise Act or Rules made thereunder - while recovering an amount under Rule 11(3)(ii), no penalty can be imposed under Rule 15 of the CCR. The appeals filed by the Appellant-Assessee are disposed off.
Issues Involved:
1. CENVAT credit availed for brand promotion services. 2. CENVAT credit availed on invoices addressed to head office/corp. office. 3. Demand under Rule 11(3)(ii) of the CCR in respect of inputs contained in semi-finished goods. 4. Demand under Rule 11(3)(ii) of the CCR in respect of inputs contained in final product lying in stock. 5. Demand under Rule 16(2) of the Central Excise Rules, 2002 on returned goods. 6. Interest and penalty under Rule 14 and Rule 15 of the CCR respectively. 7. Demand of Rs. 1,20,66,182/- under Rule 11(3)(ii) of the CCR for not reversing CENVAT credit on input (PV Yarn) lying in stock. 8. Limitation period for raising demands. Detailed Analysis: 1. CENVAT Credit on Brand Promotion Services: - Issue: Whether CENVAT credit of Rs. 89,61,000/- availed on brand promotion services should be reversed since the final product became exempted. - Finding: The Tribunal held that once CENVAT credit on input services is legally taken and utilized, it need not be reversed if the final product becomes exempted subsequently. The credit was availed on 25.02.2013, before the final product became exempt on 01.03.2013. Rule 6 of the CCR cannot be invoked to deny this credit as it applies only when both dutiable and exempt products are manufactured. Rule 11(3) of CCR applies only to inputs, not input services. - Conclusion: The demand for reversal of CENVAT credit was rightly dropped by the adjudicating authority. 2. CENVAT Credit on Invoices Addressed to Head Office: - Issue: Whether CENVAT credit availed on invoices addressed to the head office/corp. office can be denied. - Finding: The Tribunal observed that substantive benefit of CENVAT credit cannot be denied for mere procedural lapses like incorrect address on invoices. As per Rule 9(2) of the CCR, the address of the service recipient is not a mandatory requirement. - Conclusion: The adjudicating authority rightly allowed the credit of Rs. 26,70,004/-. The confirmation of demand of Rs. 14,962/- was not sustainable. 3. Demand under Rule 11(3)(ii) for Inputs in Semi-Finished Goods: - Issue: Whether the demand of Rs. 6,25,651/- under Rule 11(3)(ii) for inputs in semi-finished goods is sustainable. - Finding: The Tribunal held that the Department's allegation that inputs were consumed in a single day was based on suspicion without corroborative evidence. The Appellant-Assessee recorded the usage of inputs at the end of the month as per accounting practice. - Conclusion: The demand was set aside as the allegation was not substantiated by evidence. 4. Demand under Rule 11(3)(ii) for Inputs in Final Product: - Issue: Whether the demand of Rs. 31,24,345/- for inputs in the final product lying in stock is correct. - Finding: The Appellant-Assessee admitted liability of Rs. 32,04,919/- and had already paid Rs. 19,20,801/-. They were willing to pay the balance amount of Rs. 12,84,118/-. - Conclusion: The Appellant-Assessee is liable to pay/reverse CENVAT Credit amounting to Rs. 12,84,118/-. 5. Demand under Rule 16(2) for Returned Goods: - Issue: Whether the demand of Rs. 5,14,168/- on returned goods is sustainable. - Finding: The Tribunal observed that the returned goods were included in the finished goods stock records and there was no evidence to suggest they were kept separately. - Conclusion: The demand was set aside as it amounted to duplication. 6. Interest and Penalty: - Issue: Whether interest and penalty can be levied on the amount to be recovered under Rule 11(3)(ii). - Finding: Rule 14 of the CCR applies only if CENVAT credit is taken and wrongly utilized. An amount determined under Rule 11(3)(ii) cannot be termed as CENVAT credit taken and wrongly utilized. Penalty under Rule 15 can be imposed only when CENVAT credit is wrongly utilized in contravention of the Central Excise Act or rules. - Conclusion: No interest or penalty is leviable. 7. Demand of Rs. 1,20,66,182/- for Not Reversing CENVAT Credit on PV Yarn: - Issue: Whether the demand of Rs. 1,20,66,182/- for not reversing CENVAT credit on PV Yarn lying in stock is valid. - Finding: The demand was based on a misconception that PV Yarn credit was not reversed. The Appellant-Assessee had already considered this amount while working out the reversal under Rule 11(3)(ii). - Conclusion: The demand was set aside as it would amount to duplication. 8. Limitation Period: - Issue: Whether the demand raised by invoking the extended period of limitation is sustainable. - Finding: The demand was raised beyond the permissible period without evidence of wilful suppression or mis-declaration. The records were periodically audited and the fact of availment of CENVAT credit was reflected in ER-1 returns. - Conclusion: The entire demand confirmed vide impugned order dated 20.08.2015 was set aside on the ground of limitation. Final Order: 1. The Appellant-Assessee is liable to pay/reverse CENVAT Credit amounting to Rs. 12,84,118/-. 2. The demand of Rs. 6,25,651/- for inputs in semi-finished goods is set aside. 3. The demand of Rs. 5,14,168/- for returned goods is set aside. 4. The dropping of the demand of Rs. 89,61,000/- for brand promotion services is upheld. 5. The allowing of CENVAT Credit of Rs. 26,70,004/- is upheld, and the confirmation of Rs. 14,962/- is set aside. 6. The entire demand confirmed vide impugned order dated 20.08.2015 is set aside on the ground of limitation. 7. No interest is leviable, and the penalty imposed is set aside. 8. The appeals filed by the Appellant-Assessee are disposed of on the above terms, and the appeal filed by Revenue is dismissed.
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