2018 (2) TMI 798 - AT - Central Excise

Appellant's Challenge to Denial of Credit Partially Allowed under Cenvat Credit Rules

The appellant filed a ROM against Order No.A/89512/17/SMB dated 12/09/2017, challenging the denial of credit post the amendment in Rule 2 (k) of Cenvat ... Rectification of mistake - applicant pointed out that he could not appear when the matter was called in respect of the impugned order and therefore, could not inform the Court that in the appellant’s own case, this Tribunal has vide order No.A/772/C-IV/WZB/2006/WMB dated 09/01/2006 allowed the benefit of similar items - Held that: - for the purpose of limitation, the appellant could have held a bonafide belief in view of the Tribunal’s order in their own case dated 09/01/2006. The said bonafide belief could not have continued after Rule 2 (k) of Cenvat Credit Rules, 2004 was amended on 07/07/2009 when such goods were specifically excluded from the definition of the capital goods - impugned order modified as required - ROM application allowed. Issues:1. Appeal against Order No.A/89512/17/SMB dated 12/09/2017.2. Benefit of similar items allowed in appellant's own case.3. Findings on limitation not given in the impugned order.4. Amendment in Rule 2 (k) of Cenvat Credit Rules on 07/07/2009.5. Inadmissibility of credit post 07/07/2009.6. Intent to evade duty by continuing to take credit post 07/07/2009.7. Validity of appellant's bonafide belief post amendment in Rule 2 (k).Analysis:1. The appellant filed a ROM against Order No.A/89512/17/SMB dated 12/09/2017. The appellant's counsel highlighted that similar items were allowed in the appellant's own case previously. The absence of findings on limitation in the impugned order was also pointed out.2. The Revenue argued that an amendment in Rule 2 (k) of Cenvat Credit Rules on 07/07/2009 rendered certain items inadmissible for credit. It was contended that the appellant's continued credit claim post the amendment indicated an intent to evade duty.3. The Tribunal considered the appellant's cited decision and noted that the order in the appellant's own case did not consider a decision of the Hon’ble Apex Court, making it an invalid precedence. However, the Tribunal acknowledged that the appellant may have held a bonafide belief based on the previous Tribunal order. This belief could not persist after the 07/07/2009 amendment excluding certain goods from the definition of capital goods.4. The impugned order was modified, and a new paragraph was inserted regarding limitation. It stated that post 07/07/2009, the appellant could not claim a bonafide belief due to the clarity of the Rule. However, for the period before the amendment, the appellant's bonafide belief based on the Tribunal's decision was recognized.5. Consequently, the demand for the period up to 07/07/2009 was set aside, while the demand post that date was upheld, with a corresponding modification in the penalty. The appeal was partially allowed based on the above terms, and the ROM application was allowed as well. The judgment was pronounced in court on 28/12/2017.