Tribunal overturns denial of credit under Cenvat Credit Rules, 2004

The Tribunal set aside the Commissioner's decision to deny credit under Rule 9(1) of the Cenvat Credit Rules, 2004, and the invocation of the extended period for demand. The Tribunal held that the appellant's failure to prove duty paid character did not justify denial of credit and rejected the extended period invocation due to lack of malicious intent. The appeal was allowed, providing consequential relief to the appellant.

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Issues:
1. Admissibility of credit under Rule 9(1) of Cenvat Credit Rules, 2004.
2. Application of extended period for invoking demand.

Admissibility of credit under Rule 9(1) of Cenvat Credit Rules, 2004:
The Commissioner (Appeals) observed that the appellant had taken credit without proving the duty paid character of the inputs, which is a requirement under Rule 9(1) of the Cenvat Credit Rules, 2004. The Commissioner emphasized that when a specific procedure is prescribed, it must be followed to maintain the integrity of the legislation. The appellant failed to demonstrate the duty paid character of the capital goods, which led to the denial of credit. The Commissioner rejected the appellant's plea of technical lapse and reliance on previous decisions. Additionally, the Commissioner noted that reliance on a CESTAT order was not acceptable as it had not attained finality due to an appeal by the department in the High Court. Consequently, the Commissioner upheld the denial of credit by the adjudicating authority.

Application of extended period for invoking demand:
The Commissioner opined that the extended period could be invoked in this case due to various factors. The appellant was under the self-assessment system and was expected to be aware of the procedures. The appellant had availed credit based on inadmissible documents and had not proven the duty paid character of the capital goods. The Commissioner considered these actions as indicative of suppression with the intention to evade tax payment, justifying the invocation of the extended period. However, the Tribunal disagreed with the Commissioner's stance on the extended period. The Tribunal noted that the appellant, being a wholly owned corporation of the Government of India, could not be attributed with any malicious intent to warrant the longer period of limitation. Consequently, the Tribunal held that the demand was barred by limitation and allowed the appeal with consequential relief to the appellant.

In summary, the Tribunal set aside the impugned order based on the issues of admissibility of credit and the application of the extended period. The Tribunal disagreed with the Commissioner's decision on both counts, emphasizing the importance of following prescribed procedures and considering the lack of malicious intent on the part of the appellant.

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