2026 (1) TMI 1008 - AT - Central Excise

Availability of CENVAT credit after omission of Rule 12B held for disputed period; addendum treated as time-barred.

Omission of Rule 12B did not extinguish entitlement to CENVAT credit where taxpayers complied with prescribed job-work procedures and documentation, so ... Availability of CENVAT credit after omission of Rule 12B - Job work in textiles and textile articles - Fraudulent availment (bogus invoices) - Transitional relief and protection of accrued rights - Remand for de novo consideration by High Court - Limitation on issuance of addendum to Show Cause Notice - Requirement of separate adjudication under Section 11A - Penalty and interest provisions under Section 11AB and Section 11AC - Procedural provisions for CENVAT credit under Rule 4(5)(a) and rebate under Rule 18 - Whether the appellant is eligible to avail CENVAT Credit during the disputed period from 09.07.2024 to 30.06.2005, when Rule 12B Rules of 2002 was omitted from the statute book by notification No.11/2004-C.E. (N.T.) dated 09.07.2004? - HELD THAT:- On plain reading of the procedure prescribed under Rule 12B ibid, it transpires that the government had prescribed a detailed procedure for enabling the textile processors who had to depend upon job workers for undertaking various activities before the final products are manufactured by them, which could be cleared for home consumption on payment of duty or exported under claim for rebate. It also provided for availing CENVAT credit facility by complying with various requirements of law such as, issuance of invoice, documentation of movement of goods, maintenance and accounting of goods including generation of waste/scrap, accountability of the entire process of sending goods for job work and their return to the factory, furnishing of information to the jurisdictional Central Excise authorities etc., The said facility was withdrawn by issue of Notification No.11/2004-C.E. (N.T.) dated 09.07.2004, which came into effect immediately on the date of its issue i.e., on 09.07.2004. Thus, we are of the considered view that the appellants are eligible to CENVAT Credit during the disputed period from 09.07.2024 to 30.06.2005. It is not in dispute that the SCN for recovery of CENVAT credit was issued on 09.08.2005. Further, the addendum was issued after a lapse of more than two years i.e., on 17.09.2007. Since, the addendum had considered entirely a new ground, which was not canvassed in the original SCN dated 09.08.2005, such fresh grounds urged cannot be addressed to by the judicial forum inasmuch as the said addendum is not in continuance with the original SCN containing the same allegations. Therefore, we are of the considered view that the grounds under addendum dated 17.09.2007 is required to be issued separately under the legal provisions of Section 11A of the Central Excise Act, 1994. Thus, the demand of CENVAT Credit on account of additional ground, even though such amount is already covered under the SCN issued earlier, is required to be issued separately within the normal time limit provided under Section 11A ibid. Since, the original SCN dated 09.08.2005 was issued by invoking the extended period of limitation, the addendum thereto cannot be further issued beyond the period of two years thereto. Therefore, both on account of limitation of time as well as on merits, the addendum issued on 17.09.2007 is not legally sustainable. Thus, we do not find any merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellant M/s Venus International. Therefore, the impugned order is set aside and the appeal is allowed in favour of the appellant. As discussed, since the other appeals as per the preamble have already been disposed of, the same become infructuous. Issues: (i) Whether the appellant was eligible to avail CENVAT credit during the disputed period 09.07.2004 to 30.06.2005 after omission of Rule 12B of the Central Excise Rules, 2002; (ii) Whether the addendum dated 17.09.2007 to the original SCN dated 09.08.2005 is sustainable; (iii) If eligibility under issue (i) is affirmed, whether the appellant is liable to penal consequences.Issue (i): Whether the appellant was eligible to avail CENVAT credit during 09.07.2004 to 30.06.2005 after omission of Rule 12B.Analysis: The Court examined Rule 12B (job work in textiles), CBEC Circular No.795/28/2004-CX dated 28.07.2004 providing transitional relief, and precedent authorities including tribunal and High Court decisions holding that rights/benefits available under the rule for goods received before 09.07.2004 could not be withdrawn to the detriment of parties who had already availed the facility. The Court applied these legal positions to the facts that the appellant had availed CENVAT credit on inputs sent to job workers and had paid duty on removals for export under rebate procedures.Conclusion: The appellant was eligible to avail CENVAT credit during the disputed period; conclusion in favour of the assessee.Issue (ii): Sustainability of the addendum dated 17.09.2007 to the SCN dated 09.08.2005.Analysis: The Court found that the addendum introduced entirely new grounds (alleging fraudulent availment based on bogus invoices) beyond the original SCN and was issued after a lapse exceeding two years. The Court held that such fresh grounds could not be treated as continuation of the original SCN and, if based on new allegations, required separate issuance in accordance with Section 11A and within the prescribed time limits. On both limitation and merits, the addendum was held unsustainable.Conclusion: The addendum dated 17.09.2007 is not legally sustainable; conclusion in favour of the assessee.Issue (iii): Whether the appellant is liable to penal consequences if found eligible under issue (i).Analysis: Having held eligibility under issue (i) and having found the addendum (which alleged fraudulent availment leading to penalty) unsustainable for limitation and procedural reasons, the Court considered the impugned adjudication confirming demands and penalties. The Tribunal concluded that there is no merit in confirming the adjudged demands on the appellant.Conclusion: The appellant is not liable to the adjudged penal consequences; conclusion in favour of the assessee.Final Conclusion: On the issues decided, the Tribunal set aside the impugned adjudication insofar as it related to M/s Venus International, allowing the appeal and holding that the appellant was entitled to CENVAT credit for the disputed period, that the addendum to the SCN is unsustainable, and that the penal/duty demands confirmed against the appellant cannot be sustained.Ratio Decidendi: Where a statutory provision (Rule 12B) and administrative clarification granted transitional entitlement to avail CENVAT credit for inputs/goods held before omission of the rule, those acquired rights cannot be retrospectively withdrawn to the detriment of the assessee; an addendum introducing wholly new grounds to an earlier SCN must comply with Section 11A and time limits and cannot be sustained if issued beyond the prescribed period.