2010 (3) TMI 360 - AT - Central Excise

Tribunal Upholds Interest Demand despite Compliance with Rules, Revenue Prevails in CENVAT Credit Dispute

IOC. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, PATNA

The tribunal dismissed the appeal, upholding the demand of interest under Section 11B of the Central Excise Act despite the appellant's compliance with ... Interest-Capital Goods- the Appellants are engaged in the manufacture petroleum products and were availing credit in respect of capital goods. Appellant received capital goods in their factory in the year 2000 and availed 50% of the credit. Show Cause Notice was issued to the Appellant for denial of 50% credit on the ground that 50% credit which was to be taken in subsequent year was taken prior to installation of the machines i.e. capital goods and demand of interest was also made in the Show Cause Notice. The adjudicating authority held that 50% remaining credit was taken in subsequent financial year before the capital goods were put to use and the capital goods were actually put to use after taking of credit hence allowed the credit however demanded the interest in respect of the credit taken and utilized before the capital goods were put to use. Held that- Tribunal in the cases of Ballarpur Industries Ltd., Parasrampuria Synthetics, Ispat Industries Ltd. relied upon by the Appellant held that the installment is pre-requisite for taking second 50% CENVAT credit on capital goods as provided under Rule 4 of CENVAT Credit Rules. In view of above discussion we find no infirmity in the impugned order. The Appeal is dismissed. Issues:- Demand of interest under Section 11B of Central Excise Act read with Rule 12 of CENVAT Credit Rules, 2001 and 2002.- Interpretation of Rule 4(2B) of CENVAT Credit Rules regarding availing balance of CENVAT Credit.- Dispute over availing 50% CENVAT Credit in subsequent year.- Compliance with the provisions of CENVAT Credit Rules regarding possession and use of capital goods.Analysis:1. Demand of Interest: The appellant contested the demand of interest under Section 11B of the Central Excise Act, arguing that they complied with the provisions of Rule 4(2B) of the CENVAT Credit Rules. The adjudicating authority allowed the credit but demanded interest for utilizing the credit before the capital goods were put to use. The appellant relied on legal provisions and previous court decisions to support their contention that the demand of interest was not sustainable.2. Interpretation of Rule 4(2B): The main contention revolved around the interpretation of Rule 4(2B) of the CENVAT Credit Rules, specifically regarding the availing of the balance of CENVAT Credit in a subsequent financial year. The appellant argued that they followed the rules by availing the credit in the year the capital goods were put to use, contrary to the adjudicating authority's finding. The appellant emphasized the importance of the language used in the rules and cited legal precedents to support their interpretation.3. Dispute Over Availing 50% CENVAT Credit: The dispute centered on the appellant availing 50% CENVAT Credit in a subsequent year. The revenue contended that the credit should only be availed if the capital goods are in possession and use of the manufacturer. However, the appellant argued that they followed the rules by availing the credit in the same financial year when the capital goods were put to use, which was not in dispute. Legal provisions and court decisions were cited by both parties to support their arguments.4. Compliance with CENVAT Credit Rules: The tribunal analyzed Rule 4 of the CENVAT Credit Rules, emphasizing the requirement that the balance of CENVAT credit can be availed in a subsequent financial year if the capital goods are in possession and use of the manufacturer. The tribunal referred to legal precedents and court decisions to support its finding that the appellant's actions did not comply with the rules. The tribunal dismissed the appeal based on the interpretation of the rules and previous legal judgments cited during the proceedings.