2013 (12) TMI 877 - AT - Central Excise

Tribunal denies cenvat credit for LSHS but rules against penalty imposition

CCE, Vadodara Versus Gujarat Narmada Valley Fertilizer Co. Ltd.

The Tribunal allowed the Revenue's appeal on the admissibility of cenvat credit on Low Sulphur Heavy Stock (LSHS) used for steam and electricity ... Cenvat credit on Low Sulphur Heavy Stock – Use of fuel in generation of electricity further used - Held that:- The Commissioner (A) has set aside the order in original and allowed the appeal of the respondent holding that the cenvat credit is admissible on quantity of LSHS used in for generation of steam/electricity which is further used in the manufacture of fertilizers – M/s. Maruti Suzuki Ltd. Versus Commissioner of Central Excise, Delhi-III [2009 (8) TMI 14 - SUPREME COURT ] - the assessee is not entitled to cenvat credit in respect of LSHS used in generation of steam/electricity which is further used in the manufacture of fertilizers - the findings of the Commr (A) with regard to eligibility of cenvat credit on Low Sulphur Heavy Stock. Imposition of Penalty – Conflicting views on penalty - Penalty is not leviable on appellant/assessee, particularly when in large number of other cases, on account of conflict of views expressed by various Tribunals/High Court, the assesses have also succeeded - No penalty is imposable on the assessee – relying upon M/s. Maruti Suzuki Ltd. Versus Commissioner of Central Excise, Delhi-III [2009 (8) TMI 14 - SUPREME COURT] – Decided partly in favour of Revenue. Issues:1. Admissibility of cenvat credit on Low Sulphur Heavy Stock (LSHS) used for steam and electricity generation in the manufacture of fertilizer.2. Imposition of penalty on the respondent.Analysis:Issue 1: Admissibility of Cenvat Credit on LSHS:The appeal was filed by the Revenue against the Order in Appeal passed by the Commissioner, Central Excise, Vadodara, regarding the admissibility of cenvat credit on LSHS used in the manufacture of fertilizer. The respondent, engaged in manufacturing various chemicals falling under specific chapters of the Central Excise Tariff Act, availed cenvat credit on LSHS used as feedstock and fuel for steam and electricity generation. The Original Adjudicating Authority issued a show cause notice for recovery of cenvat credit and education cess, which was confirmed initially. However, the Commissioner, Central Excise (A), allowed the appeal of the respondent, setting aside the original order. The Revenue contended that as the inputs were used in the manufacture of steam and electricity, which further contributed to the production of exempted goods, the respondent was not eligible for cenvat credit on LSHS. The Revenue relied on a Supreme Court decision to support their argument. The Tribunal, after considering both sides, held that the cenvat credit on LSHS used for steam and electricity generation, ultimately contributing to the manufacture of fertilizer, was not admissible based on the Supreme Court decision. Therefore, the Tribunal allowed the Revenue's appeal on the eligibility of cenvat credit on LSHS to the respondent.Issue 2: Imposition of Penalty:Regarding the imposition of a penalty on the respondent, the Tribunal referred to the Supreme Court's decision in the case of Maruti Suzuki Ltd. vs. CCE, Delhi-III, where it was clarified that due to the repeated amendments in the Cenvat Credit Rules leading to significant litigation, penalty imposition was not justified. The respondent's advocate argued that there was no case for the imposition of a penalty, especially considering the conflicting views expressed by various forums. The Tribunal, in line with the Supreme Court's stance, concluded that no penalty was imposable on the respondent. Therefore, the Tribunal allowed the appeal of the Revenue only concerning the admissibility of cenvat credit on LSHS to the respondent, and the appeal was disposed of accordingly.This comprehensive analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's decision based on legal provisions and precedents cited during the proceedings.