Tribunal allows Cenvat Credit on furnace oil; no penalty imposed

The Tribunal ruled in favor of the appellant, allowing them to avail Cenvat Credit on furnace oil used in manufacturing fuel oil. The Tribunal found that the blending process resulted in a new product, justifying the credit. Additionally, the appellant's disclosure of activities and credit availment negated allegations of mis-declaration and suppression of facts. The Tribunal held that the extended period of limitation was inapplicable due to the appellant's full disclosure. No penalty was imposed as there was no suppression of facts. The appeal was allowed, setting aside the impugned order and granting consequential relief.

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Issues Involved:
1. Entitlement to Cenvat Credit on furnace oil.
2. Allegation of mis-declaration and suppression of facts.
3. Applicability of extended period of limitation.
4. Imposition of penalty.

Detailed Analysis:

1. Entitlement to Cenvat Credit on Furnace Oil:
The core issue was whether the appellant was entitled to avail Cenvat Credit on furnace oil used in the manufacture of fuel oil. The appellant argued that the process of blending and mixing Heavy Creosote Oil with furnace oil resulted in a new commodity, 'Fuel oil,' which amounts to 'manufacture.' The fuel oil had distinct characteristics and uses, such as high calorific value and low sulphur content, differentiating it from the input (furnace oil). The department contended that both products were the same and thus, the credit was inadmissible. However, the Tribunal found merit in the appellant's submission, noting that the process did result in a new product, thereby entitling them to Cenvat Credit.

2. Allegation of Mis-declaration and Suppression of Facts:
The department alleged that the appellant mis-declared the process as 'manufacture' to avail inadmissible Cenvat credit. The appellant countered that they had informed the department about the manufacture of 'Fuel Oil' and the intention to avail credit via a letter dated 01.02.2006. This was also disclosed in their ER-1 returns. The Tribunal observed that since the department was aware of the appellant's activities and credit availment, there was no mala fide intention or suppression of facts. The Tribunal cited the case of CCE v. ITC Ltd., where disclosure in ER-1 returns negated the allegation of suppression.

3. Applicability of Extended Period of Limitation:
The Show Cause Notice (SCN) was issued by invoking the extended period of limitation for the period February 2007 to March 2008. The Tribunal found that the appellant had disclosed all relevant information to the department, which negated the basis for invoking the extended period. The Tribunal held that the SCN dated 23.02.2012 was barred by limitation, emphasizing that the department was always aware of the appellant's credit availment.

4. Imposition of Penalty:
The Tribunal also addressed the imposition of penalty under Rule 15(2) of the CENVAT Credit Rules read with Section 11AC of the Central Excise Act. Given that the appellant had disclosed the credit availment and there was no suppression of facts, the Tribunal found no grounds for imposing a penalty. The Tribunal referenced several judgments, including Commissioner v. Creative Enterprise, where it was held that if duty is levied on the final product, CENVAT Credit cannot be denied even if the process does not amount to manufacture.

Conclusion:
The Tribunal concluded that the appellant was legally entitled to avail Cenvat Credit on furnace oil. The impugned order was set aside on both merits and limitation grounds. The appeal was allowed with consequential relief as per law.

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