2007 (10) TMI 95 - AT - Customs

Tribunal restricts Cenvat credit use, rules in favor of appellants

The Tribunal ruled in favor of the appellants, holding that they could not utilize Cenvat credit of AED (Textiles and Textile Articles) for payment of ... Assessee utilized credit of AED (T&TA) paid on its inputs for payment of other types of duties of excise viz., BED, AED (GSI) etc.- as per rule 3(6)(b), he could have utilized credit of AED (T&TA) only towards payment of the same kind of duty of excise i.e. AED (T&TA) - appellants plea that they cannot be held to have suppressed any fact inasmuch as they had been filing periodical returns and connected documents, is acceptable – hence larger period not invocable u/s 11A – demand time-barred Issues Involved:1. Utilization of Cenvat credit of Additional Excise Duty (AED) (Textiles and Textile Articles) for payment of other types of duties.2. Interpretation of non obstante clause in Rule 3(6) of the Cenvat Credit Rules, 2001.3. Applicability of extended period of limitation for demand of duty.Issue-wise Detailed Analysis:1. Utilization of Cenvat Credit of AED (T&TA):The primary issue was whether the Cenvat credit of AED (Textiles and Textile Articles) could be utilized for the payment of other types of duties of excise, such as Basic Excise Duty (BED) and AED (Goods of Special Importance). The appellants argued that under Rule 3(3) of the Cenvat Credit Rules, 2001, a manufacturer could utilize Cenvat credit for any duty of excise on any final product without restriction. However, the Revenue contended that Rule 3(6) governed the matter, restricting the utilization of Cenvat credit of AED (T&TA) only towards payment of AED (T&TA) and similarly for AED (GSI). The Tribunal agreed with the Revenue, holding that the appellants could not utilize Cenvat credit of AED (T&TA) for payment of BED or AED (GSI) on final products, as this was not permissible under Rule 3(6)(b) of the Cenvat Credit Rules, 2001.2. Interpretation of Non Obstante Clause in Rule 3(6):The appellants argued that the non obstante clause in sub-rule (6) of Rule 3 should be considered clarificatory and not limit the scope of sub-rule (3). They referenced various judgments to support their interpretation that the non obstante clause should not override the enacting part of the legal provision. However, the Tribunal found that the non obstante clause in sub-rule (6) had an overriding effect on sub-rule (1) but not on sub-rule (3). The Tribunal concluded that sub-rule (6)(b) should be construed without reference to the non obstante clause, leading to the interpretation that Cenvat credit of AED (T&TA) could only be utilized for payment of AED (T&TA).3. Applicability of Extended Period of Limitation:The appellants contended that the entire demand was beyond the normal period of limitation and that there was no contravention of rules with intent to evade duty. They argued that the department was always aware of their utilization of Cenvat credit and had informed the department of their practices. The Tribunal noted that the appellants had been filing returns and supplying relevant documents to the department, which, if verified, would have disclosed their utilization of AED (T&TA) for payment of other duties. Citing case law, the Tribunal held that the appellants had not suppressed any facts and that the extended period of limitation under Section 11A(1) could not be invoked. Consequently, the demand was deemed time-barred.Conclusion:The Tribunal set aside the impugned order and allowed the appeal, concluding that the appellants could not utilize Cenvat credit of AED (T&TA) for payment of other duties and that the demand was time-barred due to the improper invocation of the extended period of limitation.