2024 (4) TMI 64 - AT - Central Excise

Area-based exemption manufacturers cannot claim CENVAT credit when notification excluded from Rule 12 during specific periods

CESTAT Chandigarh held that a manufacturer operating under area-based exemption notification cannot avail CENVAT credit on inputs during the period when ... Utilization of CENVAT credit - Area Based Exemption - manufacturer/producer receiver of goods, working under N/N. 1/2010, can avail Cenvat Credit of inputs purchased from the manufacturers who are also availing the same Notification - extended period of limitation - suppression of facts or not - HELD THAT:- On going through the provisions of the Rules it is clear that in terms of Rule 3, a manufacturer/ producer of excisable goods or an output service provider can avail Cenvat Credit of Goods/Services received by them and on which applicable duty/tax is paid; the only bar appears to be on goods in respect of which benefit under Notification No. 1/2011 Central Excise dt. 1st March 2011 is availed or goods specified at serial nos. 67 and 128 in respect of which the benefit of an exemption under Notification No. 12/2012 Central excise dt. 17/03/2012 is availed. Cenvat Credit Rules cannot be read in isolation. If the Notification No. 1/2010 is not listed under Rule 12 for a certain period, it cannot be held that credit would still be admissible in view of Rule 3 (1). Such a proposition would not only render the other Rules of the Cenvat Credit Rules, particularly Rule 12, not only redundant but also would lead to unintended interpretation. This bench cannot preside over to look into Legislative intent in the Cenvat Rules framed, particularly when there is no ambiguity in the wording of the Rules. It’s a clear case of inclusion or otherwise of a Notification for certain period under Rule 12 of Cenvat Credit Rules, 2004 - the appellants are not eligible to avail Cenvat Credit during the impugned period, that is 01/05/2012 to 19/01/2014, as the notification No 1/2010 is not mentioned under Rule 12 ibid during the relevant period. Extended period of Limitation - suppression of facts or not - appellants did not disclose relevant facts in the ER-I Returns or through any correspondence and only because of the audit, Revenue could find out that the appellants have availed ineligible credit - HELD THAT:- Courts and Tribunal have been consistently holding that in order to invoke extended period, a positive act of fraud, collusion, suppression of facts etc. with intent to evade payment of duty, needs to be established. In the absence of the same, extended period cannot be invoked. Looking into the fact that the appellants have been regularly filing the ER-I Returns and have been availing self-credit of duty paid and the same was being sanctioned/ratified by speaking orders, it is found that suppression cannot be alleged. The Tribunal has held that extended period cannot be invoked for the only reason that a discrepancy has been found during the course of the audit. Therefore, the appellants succeed on limitation. The appellant has not made out any case on merits. However, they succeed on limitation - Appeal allowed on limitation. Issues Involved:1. Admissibility of CENVAT Credit.2. Invocation of Extended Period of Limitation.Summary:Admissibility of CENVAT Credit:The appellants, M/s Intex Technologies (India) Pvt. Ltd., availed CENVAT credit based on invoices received from suppliers operating under Notification No. 01/2010-CE. Revenue contended that the credit was inadmissible as the notification was not included in Rule 12 of CENVAT Credit Rules during the relevant period (01.05.2012 to 19.01.2014). The appellants argued that Rule 3 of CENVAT Credit Rules governs the admissibility and there was no restriction under Rule 3 against availing credit from suppliers who availed the said notification. The Tribunal, however, noted that Rule 12, starting with a non-obstante clause, has overriding provisions. The Tribunal held that since Notification No. 01/2010 was not listed under Rule 12 before 19.01.2014, credit could not be assumed to have retrospective effect. The Tribunal referred to the Supreme Court's decision in Dilip Kumar and Co., emphasizing strict interpretation of taxing statutes and exemption notifications in favor of the Revenue. Consequently, the Tribunal concluded that the appellants were not eligible to avail CENVAT credit during the impugned period.Invocation of Extended Period of Limitation:Revenue invoked the extended period of limitation alleging that the appellants did not disclose relevant facts in their ER-I Returns or through any correspondence, and the discrepancy was only detected during an audit. The Tribunal found this argument incorrect, stating that for invoking the extended period, a positive act of fraud, collusion, or suppression of facts with intent to evade duty must be established. The Tribunal noted that the appellants regularly filed ER-I Returns and availed self-credit of duty paid, which was sanctioned by speaking orders. Therefore, suppression could not be alleged. The Tribunal held that extended period could not be invoked merely because a discrepancy was found during an audit and ruled in favor of the appellants on the issue of limitation.Conclusion:The Tribunal concluded that the appellants were not eligible to avail CENVAT credit during the impugned period but succeeded on the issue of limitation. The appeal was allowed on limitation grounds.(Order pronounced in the open Court on 02/04/2024)