2024 (10) TMI 720 - AT - Central Excise

Rejection of availment of Cenvat credit on the grounds that it was availed more than 1 year after the date of issuance of the documents - denial of CENVAT Credit in respect of services which were used at salt pans for manufacturing salt which was the raw material for manufacturing soda ash. Whether the Commissioner (Appeals) was right in rejecting the availment of the Cenvat credit, amounting to Rs.46,27,417/- for the period of 03.12.2005 to 31.03.2012 on the ground that the credit was availed more than 1 year after the date of the issuance of the documents? - HELD THAT - The case of the department is that the credit should have been taken within 1 year from the date of invoice. Therefore, in respect of this Cenvat Credit since, the credit was taken after 1 year the same is not admissible. It is found that for arriving at this conclusion the Revenue has relied upon the provision 11 A and 11 B. These Sections nowhere prescribe about the time limit for availment of the Cenvat credit. Therefore, the borrowing of the provision of Section 11A and 11B is absolutely illegal and incorrect. As regard the amendment in Cenvat Credit Rules, 2004 prescribing the time limit of 1 year, the said amendment was made on 11.07.2014. Since in present case, entire period is up to 31.03.2012, the credit on the time limit cannot be denied. In case of Roquette Roquette Riddhi Siddhi P Ltd vs. C.C.E.-Ahmedabad-II 2024 (1) TMI 1210 - CESTAT AHMEDABAD this Tribunal has held that ' appellants have correctly taken the cenvat credit on 18/09/2014 for the invoices issued prior to 01/09/2014.' Whether the respondent can be denied Cenvat credit of the services which were used at salt pans for manufacturing salt which was the raw material for manufacturing soda ash? - HELD THAT - There is no dispute that the appellant is engaged in manufacture of salt in their factory for the purpose of manufacturing the soda ash. The appellant used salt which is the main input material. The salt is procured through salt pans which is obviously located outside the factory premises. For procurement of salt from the salt pans input service is used. Since, the salt is used directly in the manufacture of the final product viz. soda ash, the service used for procuring the salt from salt pans is directly in or in relation to manufacture of soda ash. In the various cases, it is consistently held that merely because the service is used outside the factory premises, Cenvat Credit cannot be denied so long the service has nexus with the manufacturing activity of the manufacturer. Therefore, merely because the input service is used outside the factory premises for procuring the salt from the salt pans, credit cannot be denied. In the case of PARRY ENGG. ELECTRONICS P. LTD. VERSUS C.C.E. S.T., AHMEDABAD-I, II, III 2016 (1) TMI 546 - CESTAT AHMEDABAD-LB , the issue involved was that the service was received in connection with the windmills of generation of electricity which is located outside the factory premises. The Revenue has disputed the credit only on the ground that the service was received outside the factory premises. The Larger Bench of the Tribunal, Ahmedabad clearly answered the question in favour of the assessee whereby it was held that even if the service is received outside the factory but in relation to the manufacture of the final product, the credit cannot be denied. Thus, the appellant is entitled for the Cenvat credit in respect of input service received at salt pans. Both the issues involved in the present case are in favour of the assessee. Hence, the impugned order stands modify to the above extent. The assessee s appeal is allowed.

Summary

Issues Involved:

1. Whether the Commissioner (Appeals) was right in rejecting the availment of the Cenvat credit amounting to Rs.46,27,417/- for the period of 03.12.2005 to 31.03.2012 on the ground that the credit was availed more than 1 year after the date of the issuance of the documents.
2. Whether the respondent can be denied Cenvat credit of Rs.1,21,08,667/- for services used at salt pans for manufacturing salt, which was the raw material for manufacturing soda ash.

Issue-Wise Detailed Analysis:

1. Rejection of Cenvat Credit Due to Time Limit:

The primary issue was whether the Cenvat credit of Rs.46,27,417/- could be denied based on the time limit of 1 year from the date of invoice. The department's stance was that the credit should have been availed within this period, as per the provisions of Section 11A and 11B of the Central Excise Act, 1944. However, the Tribunal found that these sections do not prescribe a time limit for the availment of Cenvat credit. The amendment to the Cenvat Credit Rules, 2004, which introduced a 1-year limit, came into effect on 11.07.2014. Since the invoices in question were issued prior to this amendment, the Tribunal held that the time limit could not be applied retrospectively. This conclusion was supported by several judgments, including those in the cases of Roquette Riddhi Siddhi Pvt. Ltd. and Global Ceramics Pvt. Ltd., which established that the limitation period does not apply to invoices issued before the amendment date. Thus, the Tribunal allowed the credit, setting aside the impugned order.

2. Denial of Cenvat Credit for Services Used Outside Factory Premises:

The second issue concerned the denial of Cenvat credit amounting to Rs.1,21,08,667/- for services utilized at salt pans, which were outside the factory premises. The department argued that since the services were used outside the manufacturing facility, the credit was inadmissible. However, the Tribunal found that the services were directly related to the manufacturing process of soda ash, as salt is a primary input material. The Tribunal emphasized that the location of service usage does not affect credit eligibility as long as the service is used in or in relation to the manufacture of the final product. This principle was consistently upheld in various judgments, including those in the cases of Parry Engg & Electronics P. Ltd., Swiss Glascoate Equipments, and Saurashtra Cement Limited. The Tribunal concluded that the services used at salt pans were indeed input services, and the credit could not be denied merely because they were utilized outside the factory premises. Consequently, the Tribunal ruled in favor of the assessee, allowing the Cenvat credit.

Conclusion:

Both issues were resolved in favor of the assessee. The Tribunal held that the Cenvat credit for the period before the amendment of the Cenvat Credit Rules, 2004, could not be denied based on a time limit that was not applicable at the time. Additionally, services used outside the factory premises but directly related to the manufacturing process were deemed eligible for credit. The impugned order was modified accordingly, allowing the assessee's appeal and dismissing the revenue's appeal.