2014 (11) TMI 706 - AT - Central Excise

Tribunal rules in favor of appellant on CENVAT credit admissibility under Notification

M/s. Jai Corp. Limited Versus Commissioner of Central Excise & ST., Vapi

The tribunal ruled in favor of the appellant on the admissibility of CENVAT credit for inputs received from 100% EOUs under Notification No. 23/2003-CE, ... CENVAT Credit on inputs procured from 100% EOU - Quantum of Additional Customs Duty included duty of excise and Educational Cess - what will be the admissible credit on inputs which are received by the appellant from 100% EOU s under Notification 23/2003-CE dated 31.3.2013 - Invocation of extended period of limitation - Held that:- Cenvat credit of Cesses was admissible before the amendment also. So far as calculation of admissible CENVAT credit, as per formula prescribed under Rule 3(7)(a) of the Cenvat Credit Rules, 2004 is concerned, appellant argued that elements of Education Cess and SHE Cess has to be considered as a part of CVD only. Appellant has relied upon the case laws of Shri Venketeshvara Precision Components vs. CCE Chennai (2010 (8) TMI 243 - CESTAT, CHENNAI) and CCE Chennai vs. Jumbo Bags Limited (2011 (11) TMI 565 - CESTAT CHENNAI). Since the amended provisions of the rules were not there, it cannot be said that the decision in the case of Emcure Pharmaceuticals Ltd. is per incurium because in the light of subsequent amendment, the benefit became available. What is required to be considered is whether the Tribunal is required to follow the decision in the case of Emcure Pharmaceuticals Ltd. or not. In my opinion, the ld. AR has not been able to make out a case on this issue. manner of taking CENVAT credit of inputs received from 100% EOU was complicated and contentious. That different views were being expressed on the issue, therefore, extended period cannot be invoked and there is no case for imposing penalties. It is observed from the case laws relied upon by the appellant that the issue of taking CENVAT credit on inputs received from 100% EOU under Notification No. 23/2003-CE and method of calculating admissible credit as per Rule 3(7) (a) formula was disputed, therefore, no intention to evade payment of duty can be attributed on the part of the appellant. Accordingly, it is held that extended period is not applicable to the present facts and circumstances of case. Accordingly, penalties can also not be imposed upon the appellant - Decided in favour of assessee. Issues Involved:1. Admissibility of CENVAT credit on inputs received from 100% EOUs under Notification No. 23/2003-CE.2. Admissibility of CENVAT credit on Education Cess and Secondary Higher Education Cess prior to 07.09.2009.3. Calculation of admissible CENVAT credit as per Rule 3(7)(a) of the Cenvat Credit Rules, 2004.4. Applicability of extended period for demand and imposition of penalties.Issue-wise Detailed Analysis:1. Admissibility of CENVAT credit on inputs received from 100% EOUs under Notification No. 23/2003-CE:The appellant argued that full credit of CENVAT credit is admissible for inputs received under Sr. No. 1 of the table to Notification No. 23/2003-CE, including cesses paid. The tribunal referred to the case law Iscon Surgicals Limited vs. CCE Jaipur, which established that when duty is paid by 100% EOU under Sr. No. 1 of the table to Notification No. 23/2003-CE, full credit is admissible. The tribunal observed from the invoices that in some cases, duty was indeed paid under Sr. No. 1, making the entire credit of CVD, including cesses, admissible to the appellant.2. Admissibility of CENVAT credit on Education Cess and Secondary Higher Education Cess prior to 07.09.2009:The tribunal examined the case of CCE Daman vs. PVN Fabrics, which discussed the admissibility of CENVAT credit on education cess before the amendment on 07.09.2009. The Revenue argued that the amendment indicated that credit was not admissible prior to this date. However, the tribunal found that the decision in Emcure Pharmaceuticals Ltd. allowed credit of education cess before the amendment, and this decision should be followed. Thus, the tribunal concluded that CENVAT credit of cesses was admissible before the amendment.3. Calculation of admissible CENVAT credit as per Rule 3(7)(a) of the Cenvat Credit Rules, 2004:The appellant argued that the calculation of admissible credit should include Education Cess and SHE Cess as part of CVD. The tribunal referred to the case laws of Shri Venketeshvara Precision Components vs. CCE Chennai and CCE Chennai vs. Jumbo Bags Limited, which supported the appellant's view. The tribunal agreed that while calculating admissible CENVAT credit under Rule 3(7)(a), Education Cess and SHE Cess should be factored in as CVD paid. However, the appellant admitted an error in calculating credit at 16% instead of 14% for a specific period, leading to excess credit of Rs. 3,91,212/-, which the appellant agreed to pay along with interest.4. Applicability of extended period for demand and imposition of penalties:The appellant argued that the issue of taking CENVAT credit on inputs from 100% EOUs was contentious and different views were expressed, thus extended period should not be invoked, and penalties should not be imposed. The tribunal observed that the issue was indeed disputed, indicating no intention to evade payment of duty by the appellant. Therefore, the tribunal held that the extended period was not applicable, and penalties could not be imposed.Conclusion:The appeal was allowed to the extent indicated, with the tribunal ruling in favor of the appellant on merits and time bar, except for the admitted excess credit of Rs. 3,91,212/- which the appellant was required to pay along with interest. The tribunal concluded that no penalties were imposable due to the contentious nature of the issue.