2013 (7) TMI 401 - AT - Central Excise

Tribunal orders fresh review, waives pre-deposit, clarifies credit rules, reassesses penalties.

3M India Limited, UB City, Bangalore and others Versus The Commissioner of Central Excise & Service Tax, Large Tax Payers Unit Bangalore

The tribunal remanded the case for de novo adjudication, dispensing with the pre-deposit and directing the Commissioner to proceed under the premise that ... Distribution of Cenvat credit on input service by corporate office to its sister concerns – Corporate office not registered as input service distributor - appellant-company recognized as a LTU, the provisions of Rule 12A are squarely applicable to them – Credit transferred on the basis of transfer challan – Held that:- Appropriate entry has to be made in the record maintained under Rule 9 (See sub-rules (5) and (6) of this Rule). The transfer of credit has to be effected by issue of transfer challan containing the registration number, name and address of the transferor-premises (sender-premises) as well as the registration number, name and address of the transferee-premises (recipient-premises), the amount of credit transferred and also the particulars of the entry made in the record maintained under Rule 9. The CENVAT credit on the basis of transfer challans can be taken at the transferee (recipient) premises. Nowhere in sub-rule (4) of Rule 12A is there any requirement of any ISD registration number to be mentioned in a transfer challan. What the sub-rule requires, inter alia, is the mention of 'registration number' i.e. Central Excise registration number or Service Tax registration number - The admissibility of the credits to the three manufacturing units will be subject to the conditions and limitations prescribed under Rule 12A – Appeal allowed by way of remand with a request to the Commissioner to undertake de novo adjudication of the dispute in accordance with law and the principles of natural justice - Adjudicating authority should proceed on the premise that Rule 12A of the CCR, 2004 is applicable to the appellant – Decided in favor of Assessee. Issues Involved:1. Waiver of pre-deposit and stay of recovery of adjudged dues.2. Validity of CENVAT credit distribution without ISD registration.3. Applicability of Rule 12A of the CENVAT Credit Rules, 2004 to Large Taxpayer Units (LTUs).4. Legality of penalties imposed on the corporate office and manufacturing units.Detailed Analysis:Waiver of Pre-Deposit and Stay of Recovery:The appellant sought a waiver of pre-deposit and a stay on the recovery of adjudged dues. The tribunal, after reviewing records and hearing both sides, found the case fit for remand to the adjudicating authority. Consequently, the pre-deposit was dispensed with, and the appeal was taken up for disposal.Validity of CENVAT Credit Distribution Without ISD Registration:The Commissioner's order held that the corporate office distributed CENVAT credit to its manufacturing units without obtaining ISD registration, rendering the challans invalid for the purpose of availing CENVAT credit. The appellant contested this, arguing that the corporate office was not distributing but transferring credit under Rule 12A(4) of the CENVAT Credit Rules, 2004, applicable to LTUs. The tribunal noted that the Commissioner failed to distinguish between 'transfer' and 'distribution' of credit and erroneously ruled out the applicability of Rule 12A.Applicability of Rule 12A of the CENVAT Credit Rules, 2004 to LTUs:The appellant, being recognized as a LTU, argued that Rule 12A, which allows the transfer of CENVAT credit between registered units of a LTU without ISD registration, applied to them. The tribunal highlighted that Rule 12A begins with a non obstante clause and provides a special procedure for LTUs, including the transfer of CENVAT credit via transfer challans without requiring ISD registration. The Commissioner's decision to invalidate the challans on the ground of non-registration was found to lack statutory backing, as Rule 12A does not necessitate ISD registration for such transfers.Legality of Penalties Imposed:The Commissioner imposed penalties on the corporate office and manufacturing units under Rule 15 read with Rule 25 of the Central Excise Rules, 2002. The appellant contended that non-registration as ISD was a procedural lapse and not a substantive violation warranting penalties. The tribunal observed that the penalties were imposed without considering the bona fide belief of the appellant regarding the applicability of Rule 12A and the absence of any intent to evade duty or avail undue benefit. The tribunal directed the adjudicating authority to reassess the penalties in light of the correct legal framework.Conclusion:The tribunal set aside the impugned order and remanded the case for de novo adjudication, directing the Commissioner to proceed under the premise that Rule 12A of the CCR, 2004 is applicable to the appellant. The adjudicating authority was instructed to distinguish between 'transfer' and 'distribution' of credit and to verify compliance with Rule 12A's conditions. The stay application was also disposed of, and the operative portion of the order was pronounced in open court.