2008 (4) TMI 266 - AT - Central Excise

Significant Appeal Outcome on Cenvat Credit Eligibility: Importance of Documentation and Procedural Compliance

INNOVATIVE INSTRUMENTS PVT. LTD. Versus COMMR. OF C. EX., VADODARA-II

The appeal in this case centered on the eligibility for Cenvat credit of C.V.D. paid via D.E.P.B. scrip. Despite conflicting decisions, the appellant's ... Credit availed of CVD paid by debit in DEPB scrip – By invoking larger period, SCN was issued on ground that credit is admissible only when C.V.D. is paid in cash – since there were conflicting decisions on this issue and records were maintained properly by assessee, it cannot be held that there was intention to suppress the facts – therefore, even though issue has to be decided in favor of Revenue on merit, the order imposing demand, interest, penalty and redemption fine cannot be sustained Issues involved:Eligibility for Cenvat credit of C.V.D. paid by debiting in D.E.P.B. scrip, applicability of extended period for show cause notice.Analysis:The judgment in this case revolves around the issue of eligibility for Cenvat credit of C.V.D. paid by debiting in D.E.P.B. scrip. The appellant had availed Cenvat credit based on 5 bills of entry where C.V.D. was paid through D.E.P.B. scrip. A show cause notice was issued proposing recovery of the amount and penalties on the grounds that credit is only admissible when C.V.D. is paid in cash. The matter was adjudicated, and it was found that the issue of eligibility for such credit had been settled by a Larger Bench in a previous case in favor of the Revenue. However, the show cause notice was issued invoking the extended period, leading to a question of the applicability of the extended period.During the relevant period, conflicting decisions existed on the issue of eligibility for Cenvat credit in such cases. The Larger Bench's decision favored the Revenue, distinguishing previous judgments. The appellant argued that they had maintained proper records and disclosed the credit taken in their returns. The fact that there was a difference of opinion between different Tribunal Benches also worked in the appellant's favor. Despite the merit of the issue favoring the Revenue, the order was deemed unsustainable on grounds of limitation. Therefore, the appeal was allowed, and the demand for Cenvat credit, interest, redemption fine, and penalty were held to be unsustainable.The judgment highlights the importance of proper record-keeping and the impact of conflicting decisions on legal issues. It also emphasizes the significance of adherence to procedural limitations, such as the extended period for issuing show cause notices. Ultimately, the decision in this case underscores the need for clarity and consistency in legal interpretations to ensure fair outcomes for all parties involved in such disputes.