Tribunal allows appeal, finding Show Cause Notice time-barred. Appellants succeed on limitation issue.

The tribunal allowed the appeal, declaring the Show Cause Notice (SCN) as time-barred. Although the appellants did not succeed on the entitlement to Cenvat credit, the tribunal found in their favor on the limitation issue. The appellants' communication and actions regarding availing Cenvat credit put the department on notice, leading to the SCN being issued beyond the permissible period. As a result, the appeal was allowed based on the limitation grounds, with consequential reliefs granted as per law.

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Issues Involved:
1. Entitlement to Cenvat credit on inputs lying in stock, work in progress, and finished goods post-rescinding of exemption notification.
2. Applicability of the time limit for availing Cenvat credit under Rule 4 (1) of CCR, 2004.
3. Limitation period for issuing Show Cause Notice (SCN).

Detailed Analysis:

1. Entitlement to Cenvat Credit:
The main issue is whether the appellants are entitled to Cenvat credit on inputs lying in stock, work in progress, and finished goods as of the date of rescinding of the exemption notification per Rule 3 (2) of CCR, 2004. The appellants argued that Rule 3 (2) allows credit for inputs in stock when the final product ceases to be exempted. They contended that the non-obstante clause in Rule 3 (2) takes precedence over other rules, including Rule 4 (1). The appellants cited several cases to support their argument that the time limit of six months or one year is not applicable for invoices issued before 01.09.2014.

2. Applicability of the Time Limit:
The department's stance, reiterated in the Order-in-Original, was that the credit availed by the appellants is not admissible as per the proviso to Rule 4 (1) of CCR, 2004, which mandates that credit can only be availed within one year from the date of invoice. The tribunal observed that the provisions of Rule 4 are clear regarding the time limit for availing Cenvat credit and must be read in a holistic and harmonious manner with other rules. The tribunal agreed with the Commissioner’s interpretation that the transitional credit is subject to the provisions of Rule 4 (1).

3. Limitation Period for Issuing SCN:
The appellants argued that the issue is also hit by limitation. They had informed the department of their intent to avail Cenvat credit via a letter dated 29.04.2016 and reflected the credit in their ER-1 returns for September 2016. The SCN was issued on 27.06.2019, beyond the permissible period. The tribunal found that the appellants had put the department on notice through their letter and returns, and thus, the SCN issued after more than two years was time-barred. The tribunal noted that the appellants, being a company under the Ministry of Defence, could not be alleged to have an intention to evade payment of duty.

Conclusion:
The tribunal concluded that while the appellants did not succeed on the merits of the issue regarding the entitlement to Cenvat credit, they made a strong case on the ground of limitation. The SCN was deemed time-barred, and the appeal was allowed on this count, with consequential reliefs as per law.

Order Pronounced:
The appeal was allowed, and the SCN was declared time-barred. The order was pronounced in the Open Court on 31.01.2022.

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