2016 (7) TMI 1026 - AT - Central Excise

Tribunal affirms Cenvat Credit eligibility on input-fuel without separate accounts

The Tribunal upheld the decision of the Ld Commissioner (Appeals) in favor of the Respondent regarding the eligibility of Cenvat Credit on input-fuel, ... Cenvat Credit on input-fuel used for generation of electricity - maintenance of separate accounts for inputs used as fuel excluded by Rule 57AD and Rule 6(2) - extended period of limitation - penalty under Section 11AC of the Central Excise Act, 1944Cenvat Credit on input-fuel used for generation of electricity - precedential effect of Gujarat Narmada Valley Fertilisers Ltd. - Entitlement to Cenvat credit on furnace oil used as fuel for generation of electricity - HELD THAT: - The Tribunal noted that the substantive question on admissibility of Cenvat credit for input-fuel used in power generation has been decided against the respondent by the Hon'ble Supreme Court in Gujarat Narmada Valley Fertilisers Ltd and subsequently followed by the Larger Bench of the Tribunal and upheld by the Gujarat High Court. Applying that precedent, the Tribunal held that on the merits the Revenue succeeds in disallowing the Cenvat credit claimed on such fuel for the period in question. [Paras 6]Cenvat credit claim on furnace oil used for generation of electricity is not allowable on merits; Revenue succeeds on the substantive issue.Maintenance of separate accounts for inputs used as fuel excluded by Rule 57AD and Rule 6(2) - extended period of limitation - penalty under Section 11AC of the Central Excise Act, 1944 - Invocation of extended period of limitation and imposition of penalty for alleged non-maintenance/non-disclosure regarding use of fuel - HELD THAT: - The Tribunal accepted the finding of the Commissioner (Appeals) that inputs used as fuel for generation of electricity were excluded from the requirement of maintaining separate accounts under the applicable rules (Rule 57AD of the erstwhile Central Excise Rules and Rule 6(2) of the Cenvat Credit Rules). In the absence of a statutory requirement to maintain separate accounts for such inputs during the relevant period and no finding of suppression or mis-declaration, the Tribunal held that invocation of the extended period and imposition of penalty under Section 11AC were not sustainable. The Revenue had not challenged these specific findings in its grounds of appeal, and the Tribunal found no reason to interfere. [Paras 7, 8, 9]Extended period of limitation cannot be invoked and penalty under Section 11AC is not imposable; the Commissioner (Appeals) order setting aside demand and penalty is upheld.Final Conclusion: The Tribunal upholds that, while the Revenue is entitled to succeed on the substantive question of disallowance of Cenvat credit on fuel (following binding precedent), the demands for the extended period and penalty are quashed because the requirement to maintain separate accounts for the fuel was excluded by the applicable rules and there was no suppression or mis-declaration; the Commissioner (Appeals) order is therefore affirmed in part and set aside on merits in part accordingly. Issues:1. Cenvat Credit eligibility on input-fuel2. Limitation period for penalty impositionAnalysis:Issue 1: Cenvat Credit eligibility on input-fuelThe appeal was filed by the Revenue against the order passed by the Commissioner of Central Excise (Appeals), Rajkot, alleging wrong availment of Cenvat Credit on Furnace Oil used as fuel and other inputs. The Revenue contended that the issue of eligibility of CENVAT Credit on input-fuel was settled by the Hon'ble Supreme Court. The Advocate for the respondents argued that the respondent had succeeded on limitation before the Ld Commissioner (Appeals) due to conflicting decisions at the relevant time. The Tribunal held that the issue on merit favored the Revenue based on the Supreme Court's decision. However, the Advocate for the Respondent successfully argued that no separate accounts were required to be maintained for inputs used as fuel, as they were specifically excluded under the relevant rules. The Tribunal upheld the Ld Commissioner (Appeals) decision in favor of the Respondent on this issue.Issue 2: Limitation period for penalty impositionThe Ld Commissioner (Appeals) found that the appellant had followed the procedures as per the law and was not liable for any penalty under the Central Excise Laws. The Commissioner also concluded that the extended period of limitation could not be invoked against the appellant as they had not suppressed any facts. The Revenue did not challenge these findings specifically in their grounds of appeal. The Ld AR for the Revenue argued that a larger period of limitation could be invoked as the appellant had not disclosed the use of fuel in the generation of electricity. However, the Ld Advocate for the Respondent pointed out that no separate accounts were required to be maintained for inputs used as fuel. The Tribunal agreed with the Ld Commissioner (Appeals) that the demands for the extended period of limitation and penalty imposed could not be sustained. Therefore, the order of the Ld Commissioner (Appeals) setting aside the demands for the extended period of limitation and penalty was upheld, and the appeal was disposed of accordingly.