Commissioner Customs & Central Excise, Rajkot Vs Nayara Energy Limited (CESTAT Ahmedabad)
Conclusion: Interest was not leviable by Commissioner under Cenvat Credit rules as Commissioner, on his own, examined as to whether assessee was eligible to avail and utilize CENVAT credit under rule 11 or rule 3(2) of the 2004 Credit Rules however, assessee had not made any such claim for availing the credit. It was, therefore, not possible to uphold the order passed by Commissioner.
Held: In the instant case, the refinery project of assessee was expected to start in the year 1998, but it was put on hold and was revived only in the year 2005, after which the manufacturing activities commenced sometimes in the year 2006. Assessee claimed to have availed CENVAT credit in the months of January and February 2010 on steel plates which were used in the fabrication of Storage Tanks. These steel sheets were procured by assessee between November 1997 to December 1998 but the fabrication of the Storage Tanks could be completed only in the year 2007. Assessee had applied for registration before the Excise Department on 08.11.2006, as it had earlier been informed that CENVAT credit could be availed by assessee only after the refinery was setup. Commissioner had accepted the contention of assessee that the eligibility to take CENVAT credit had to be determined in the light of the 2004 Credit Rules. However, even after accepting that prior to the grant of central excise registration there could be no place called factory and that the date of registration had to be construed as the relevant date for deciding eligibility of credit, the Commissioner held that assessee was not eligible to avail CENVAT credit under rule 3(1) of the 2004 Credit Rules as the inputs in question were received prior to 10.09.2004, on which date the said rules came into force. Assessee contended that the Commissioner could not have arrived at this conclusion after having recorded a finding that it was only on the grant of central excise registration that the factory came into existence, which date in the present case, was on 08.11.2006. The show cause notice issued to assessee also stated that the eligibility to take credit was required to be examined in accordance with the 1944 Excise Rules and that assessee had to demonstrate that it had earned the credits under the said rules. However, the Commissioner did not accept this contention and upheld the denial of CENVAT credit on grounds and reasons beyond those urged in the show cause notice. A show cause notice laid down the foundation and the order had to confine itself to the allegations made in the show cause notice. It was held that assessee had explained as to why it could not immediately avail CENVAT credits on Tanks fabricated in the year 2007. It had been stated that the process of collating and mapping the actual quantity of steel plates issued and consumed in the fabrication of Storage Tanks took some time as the goods were received between 1997-1998 and the fabrication work of Storage Tanks was completed only in the year 2007. It was to be noted that under rule 4(1) of the 2004 Credit Rules, it was only in September 2014 that a time limit of 6 months/1 year was prescribed for availing CENVAT credit. The observations made by the Commissioner in the impugned order that declaration was required to be filed under rule 57(G) of the 1944 Excise Rules, was also not relevant as the eligibility of inputs received by assessee in the factory was to tested in terms of the 2004 Credit Rules and not the rule prevalent earlier, namely rule 57(G) of the 1944 Excise Rules. Even otherwise, the receipt of the HR sheets and Steel Plates were covered under the declarations submitted by assessee under the erstwhile rule 57(T) of the 1944 Excise Rules. The Commissioner, on his own, examined as to whether assessee was eligible to avail and utilize CENVAT credit under rule 11 or rule 3(2) of the 2004 Credit Rules. It was to be noted that assessee had not made any such claim for availing the credit. It was, therefore, not possible, for the reasons stated above, to uphold the order passed by the Commissioner.
