2024 (10) TMI 145 - AT - Central Excise

CENVAT Credit - denial on the ground that the the Excise Duty collected from their buyers is required to be recovered under Section 11D of the Central Excise Act, 1944 - time limitation. HELD THAT - The appellant, though is primarily in the business of manufacture of SS Hose Assembly, Flange Fittings, has also been carrying on the other business activities by way of procuring the MS Round, TMT Bars etc. After undertaking some work on them, was clearing the same to his buyers. On receipt of such materials under proper Excise Invoice from their vendors, they were taking the Cenvat Credit. At the time of clearance of these goods to their buyers, the entire Cenvat Credit taken was being reversed. As a matter of fact, from the Show Cause Notice, it is seen that the demand is towards Cenvat Credit of Rs. 1,46,75,425/- and even for under Section 11D, the same amount has been demanded. It shows that the entire Cenvat Credit taken was properly reversed by them when the goods were cleared to their buyers. In such a case, it would be more in the nature of clearance of goods under Rule 3(5) of CCR, 2004 rather than clearance of finished goods - the Department had not raised any objection for the Excise Duty payments made towards such transactions being carried on by the appellant. Both Cenvat Credit taking and Cenvat debiting have been reflected by them in their ER-1 Returns. It is also not the case of the Department that the goods in question were not received by them in their factory or not accounted for by them in their Books of Account. The Appellant has produced documentary evidence to the effect that all the payments towards purchase of these items have been made through banking channels. In such a case, there are no justification on the part of the Revenue to confirm the demand by denying the Cenvat Credit taken. Time limitation - HELD THAT - There are considerable force in the appellant s argument that the Show Cause Notice has been issued belatedly on 30/09/2013 while the transactions have taken place during the period 2008-10. All the transactions towards Cenvat taking and Cenvat debiting are part of the ER-1 Returns, which are also part of the relied upon documents to issue the Show Cause Notice. Therefore, no case of suppression has been made out against the appellant - the impugned order set aside even on account of time bar. The appeals stand allowed both on account of merits as well as on account of time bar.

Summary

Issues:
- Denial of Cenvat Credit under Rule 14 of Cenvat Credit Rules, 2004
- Time-barred Show Cause Notice issued for the period 2008-2010

Analysis:

1. The case involves the denial of Cenvat Credit to the appellant by the Adjudicating Authority under Rule 14 of the Cenvat Credit Rules, 2004. The appellants, engaged in manufacturing SS Hose Assembly, Flange & Fittings, also processed and sold MS Round, TMT Bars, etc. purchased from suppliers. The Show Cause Notice issued alleged that the appellant was not eligible for Cenvat Credit, necessitating recovery under Section 11D of the Central Excise Act, 1944. The Adjudicating Authority denied Cenvat Credit amounting to Rs. 1,46,75,425/-, charged interest, and imposed a penalty under Section 11AC. However, the demand under Section 11D was dropped. The appellant contested this denial of Cenvat Credit before the Tribunal, arguing that they had properly paid Excise Duty on goods sold, as evidenced by invoices and returns filed.

2. The appellant's consultant contended that the Excise Duty payment was reflected in their invoices, remitted to the Central Excise Department, and returns were filed, indicating compliance. The consultant further argued that since the goods in question were not received at the factory premises but purchased through banking channels with proper invoices, and Excise Duty was discharged upon clearance to buyers, there was no basis for denying Cenvat Credit. Citing case laws, including Pioneer Carbide (P) Ltd. and R S Ispat Pvt. Ltd., the appellant sought to establish that as long as Cenvat Credit is utilized and goods are cleared with Excise Duty payment, the credit cannot be denied.

3. The Tribunal examined the appellant's business activities, noting their procurement of materials like MS Round, TMT Bars, etc., which were cleared to buyers after taking and reversing Cenvat Credit. The Tribunal observed that the demand for Cenvat Credit and under Section 11D was the same, indicating proper reversal of credit upon goods clearance. It was noted that the Department did not object to the Excise Duty payments made by the appellant. The appellant's compliance with recording Cenvat Credit and clearance details in returns, along with evidence of payments through banking channels, supported the Tribunal's view that the denial of Cenvat Credit lacked justification.

4. Referring to precedents, the Tribunal highlighted the importance of compliance with Rule 16 of CER 2002 and the utilization of Cenvat Credit while clearing goods. The Tribunal emphasized that the appellant had reversed the Cenvat Credit and paid additional duty while clearing goods, meeting the legal requirements. Considering the factual evidence presented by the appellant, including banking transactions and statutory returns, the Tribunal found the confirmed demand unsustainable and allowed the appeal on merits. Additionally, the Tribunal addressed the time-bar aspect, concluding that the Show Cause Notice issued in 2013 for transactions in 2008-2010 lacked justification and set aside the order on this ground as well.

5. Ultimately, the Tribunal allowed the appeals on both merit and time-bar issues, granting the appellants eligibility for consequential relief as per law. The judgment highlighted the importance of proper documentation, compliance with Excise Duty payments, and the reversal of Cenvat Credit upon goods clearance to support the appellant's case against the denial of credit and the time-barred Show Cause Notice.