2019 (7) TMI 394 - AT - Central Excise

Tribunal Overturns Duty Demand, Emphasizes Compliance, No Fraudulent Intent

M/s. Mahanadi Coalfields Ltd., Versus Commissioner of Central Excise & S. Tax, Rourkela

The Tribunal set aside the demand for duty, interest, and penalty in the appellant's appeal against the disallowance of CENVAT credit on capital goods. ... CENVAT Credit - capital goods - the capital goods received prior to the imposition of central excise levy on final product (i.e. Coal) - time limitation - HELD THAT:- The levy of central excise was new in 2011 during which period the appellant has availed the credit on capital goods which is in dispute. The appellant, right from the adjudication stage to the stage of first appeal, has all along submitted that the subject goods, excavators, have been received in knocked down condition on 17.02.2011 which got ready for use only on 17.06.2011 on which date the GRN was prepared and goods were recorded in the Books and credited. In view of the decisions of this Tribunal in M/S. NEPA LTD. VERSUS CCE, INDORE [2013 (11) TMI 776 - CESTAT NEW DELHI] and the Apex Court decision in COMMISSIONER OF C. EX., CHENNAI-I VERSUS CHENNAI PETROLEUM CORPN. LTD. [2007 (4) TMI 4 - SUPREME COURT] , it is held that the appellant being a PSU would not have reason to avail wrong credit with intention to evade payment of duty. Moreover, since the central excise levy was made applicable for the first time, the issue of availing credit on capital goods during the cut off date would arise as a one-time affair for which there may be inadvertent error not attributable to wilful suppression or deceit to avail irregular credit. The issue of availment of credit involves a legal interpretation and therefore, it cannot be said that there would have been deliberate attempt on the part of the appellant to avail irregular credit. Appeal allowed on the ground of limitation. Issues:- Disallowance of CENVAT credit on capital goods- Applicability of CENVAT Credit Rules, 2004- Interpretation of Rule 4(2)(a) of CCR- Legal eligibility for availing CENVAT credit- Time bar for duty demand- Intent to evade payment of duty- Penalty imposition- New levy of central excise on coal in 2011Analysis:1. Disallowance of CENVAT Credit on Capital Goods: The appellant, engaged in coal manufacturing, appealed against the disallowance of CENVAT credit of Rs. 27,31,354 on capital goods received before the imposition of central excise duty on coal. The issue revolved around the date of receipt of capital goods and the subsequent availment of credit, leading to a dispute with the authorities.2. Applicability of CENVAT Credit Rules, 2004: The appellant argued that as per Rule 4(2)(a) of CCR, CENVAT credit can be availed for capital goods received in a factory at any point during a financial year. Citing the decision of the Madras High Court, the appellant contended that the date of receipt does not restrict the availment of credit, emphasizing the legal interpretation of the rules.3. Interpretation of Rule 4(2)(a) of CCR: The appellant relied on the Madras High Court judgment to support their claim that the provision allows for claiming CENVAT credit on capital goods at any time during a financial year, as long as the goods manufactured are not exempted. This interpretation was crucial in determining the eligibility of the appellant for the disputed credit.4. Legal Eligibility for Availing CENVAT Credit: The Tribunal considered the appellant's submission regarding the inadvertent error in availing the credit, given the new levy of central excise on coal in 2011. The appellant's status as a Public Sector Undertaking (PSU) and the lack of deliberate intent to evade duty played a significant role in the decision to set aside the demand for duty, interest, and penalty.5. Time Bar for Duty Demand: The Tribunal noted that the issue of availing credit on capital goods during the initial phase of central excise levy on coal was a one-time occurrence, potentially leading to inadvertent errors. The appellant's timely disclosure of details in returns and the absence of intentional evasion supported the decision to consider the issue within the grounds of limitation.6. Intent to Evade Payment of Duty: The appellant's argument, supported by legal precedents, emphasized the absence of fraudulent intent or suppression in availing the disputed credit. The Tribunal considered the appellant's compliance history and the nature of the new excise duty regime on coal in assessing the intent behind the credit availment.7. Penalty Imposition: The Tribunal did not find grounds for imposing a penalty, given the legal interpretation involved in the case and the lack of deliberate evasion by the appellant. The focus remained on the eligibility for availing CENVAT credit under the specific circumstances of the appellant's operations and the regulatory changes in the industry.8. New Levy of Central Excise on Coal in 2011: The introduction of central excise duty on coal in 2011 was a pivotal factor in the case, shaping the interpretation of rules and the eligibility criteria for availing CENVAT credit on capital goods. The Tribunal's decision considered the unique circumstances surrounding the appellant's operations during the transition to the new excise regime.This detailed analysis highlights the key legal arguments, interpretations, and considerations that informed the Tribunal's decision to set aside the demand for duty, interest, and penalty in the appellant's appeal against the disallowance of CENVAT credit on capital goods.