Intex Technologies India Pvt. Ltd. Vs Commissioner of Central Excise And Service Tax (CESTAT Chandigarh)
CESTAT Chandigarh considered whether the appellants could avail CENVAT credit on inputs purchased from manufacturers availing Notification No. 01/2010-CE dated 06.02.2010 during the period 01.05.2012 to 19.01.2014.
The appellants were availing area-based Notification No. 01/2010-CE and procured inputs from vendors in Jammu & Kashmir for manufacturing computer speakers. Revenue disputed their CENVAT credit on the ground that Notification No. 01/2010 was not covered by Rule 12 of the CENVAT Credit Rules during the relevant period. A show-cause notice dated 01.06.2017 demanding Rs.1,75,82,647/- was issued and the demand, along with interest and equal penalty under Section 11AC of the Central Excise Act, 1944, was confirmed by order dated 06.12.2018 by invoking the extended limitation period.
The appellants submitted that Rule 3 governed CENVAT credit entitlement and contained no restriction where suppliers had availed Notification No. 01/2010. They relied on several Tribunal decisions and contended that the Department was aware of their practice because refunds/self-credits had been allowed through speaking orders after verification. Therefore, they argued that the extended limitation period could not be invoked.
Revenue contended that credit was inadmissible before 19.01.2014 because Notification No. 01/2010 was included under Rule 12 only from that date. It relied on the non-obstante clause in Rule 12 and argued that the appellants had not disclosed the relevant credit in ER-I returns. Revenue also contended that the extended period, interest and penalty were justified.
The Tribunal held on merits that Notification No. 01/2010 could not be given retrospective effect merely because it was subsequently included in Rule 12 from 19.01.2014. Since the notification was not listed under Rule 12 during the relevant period, CENVAT credit was not admissible. The Tribunal relied on the principle of strict interpretation of taxing and exemption provisions stated in Dilip Kumar and Co.
However, on limitation, the Tribunal found in favour of the appellants. It held that invocation of the extended period requires a positive act involving fraud, collusion, suppression of facts or similar conduct with intent to evade payment of duty. Considering that the appellants had regularly filed ER-I returns and their self-credit was being sanctioned or ratified through speaking orders, the Tribunal found that suppression could not be alleged merely because the discrepancy was detected during audit.
Accordingly, although the appellants failed on merits, they succeeded on limitation. The appeal was therefore allowed on limitation.
Cases Discussed
- Dilip Kumar and Co. (Supreme Court), 2018(361) ELT577(SC)
- Rajindra Industries Vs. Commissioner of CGST Jammu (CESTAT Chandigarh), 2022 (1) TMI-CESTAT Chandigarh
- Hardcastle Petrofer Pvt. Ltd. &Ors. V. Commissioner of CE & ST, J&K (CESTAT Chandigarh), 2021 (5) TMI 28 – CESTAT Chandigarh
- Accent Pharma vs. CGST Jammu (CESTAT Chandigarh), 2021 (7) TMI-CESTAT Chandigarh
- Modern Insecticides Ltd. Vs. CCE & ST Jammu (CESTAT Chandigarh), 2021 (7) TMI-CESTAT Chandigarh
- Sunil HI-Tech Engineers ltd. (CESTAT Mumbai), 2014 (36) STR 40 (TRI-MUM)
- Dharampal Satyapal Ltd. Vs CCE (CESTAT Allahabad), 2017 (352) ELT 396 (Tri. Allahabad)
- Periwal Polymers (P) Ltd. Vs. CCE Alwar (CESTAT New Delhi), 2018 (11) TMI 614 – CESTAT- New Delhi
- SaraswatiAgro Chemicals (India) Pvt. Ltd. Vs. CCE Jammu (CESTAT Chandigarh), 2018 (9) TMI- CESTAT Chandigarh
- M/s Mahindra Sons Ltd. (CESTAT Mumbai), 2016-TIOL-1174-CESTAT-MUM
- UOI Vs Willowood Chemicals Pvt Ltd. (Supreme Court), 2022(60) GSTL 3(SC)
- International Auto Ltd (Supreme Court), 2010 (250) ELT-3 (SC)
- Jabalpur Oxygen Company, 1991 (52) ELT 455
- Chemfab Alkalies Ltd., 2010 (251) (ELT) 264 (TRI-CHENNAI)
- CCE, Shillong vs. Jellalpore Tea Estate, 2011) ELT 14 (Gau)
- VW India Pvt. Limited vs. CCE Jammu, Final Order No. 62430/2018 dated 04.06.2018
- Gellapore Tea Estate, 2011 (268) ELT (GAU)
- JMW Pvt Ltd., final order dt. 04/06/2018
- Veer oversees, 2015(18) GSTL 59(TRI-LB)
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
M/s Intex Technologies (India) Pvt. Ltd. (earlier known as M/s Glow-tech Industries), the appellants, are availing area-based Notification No.01/2010-CE dated 06.02.2010; the appellants procure inputs from various vendors, located in Jammu & Kashmir, for the purpose of manufacturing computer speakers; the appellants availed CENVAT credit on the basis of the invoices received and have utilized the same; Revenue questioned the utilization of CENVAT credit for the reason that the Notification No. 01/2010-CE availed by the suppliers was not mentioned in Rule 12 of CENVAT Credit Rules during the relevant period i.e 01.05.2012 to 19.01.2014; a show-cause notice dated 01.06.2017 demanding service tax of Rs.1,75,82,647/- was issued to the appellants; the said show-cause notice was confirmed vide impugned order dated 06.12.2018 wherein the Adjudicating Authority confirmed the demand along with interest and equal penalty under Section 11AC of Central Excise Act, 1944 by invoking extended period of limitation. Hence, this appeal.
2. Shri P.K. Hasija, assisted by Shri Shivang Puri, learned Counsels for the appellants, submits that admissibility of CENVAT credit is governed by Rule 3 of CENVAT Credit Rules and there is nothing in the language of Rule 12 of CENVAT Credit Rules which restricts the entitlement; in terms of Rule 3, the input should be duty paid and received in the factory of the manufacturer; there is no restriction that credit shall not be available if the supplier had availed refund of the same under some notification; it is pertinent to note that Rule 3(1) of CENVAT Credit Rules categorically specifies that CENVAT credit shall not be allowed if the manufacturer or producer of final products has availed the benefit of Notification No. 01/2011-CE dated 01.03.2011 and Notification No. 12/2012-CE dated 17.03.2012 and there is no such bar in respect of the impugned notification.
3. Learned Counsel submits that in case of Dharampal Satyapal Ltd. Vs CCE – 2017 (352) ELT 396 (Tri. Allahabad), the Tribunal decided a similar case of availment of CENVAT credit in respect of National Calamity Contingence Duty where the supplier availed exemption under Notification No.27/2011. He relies on the following cases:
(i) Periwal Polymers (P) Ltd. Vs. CCE Alwar- 2018 (11) TMI 614 – CESTAT- New Delhi;
(ii) SaraswatiAgro Chemicals (India) Pvt. Ltd. Vs. CCE Jammu- 2018 (9) TMI- CESTAT Chandigarh;
(iii) Hardcastle Petrofer Pvt. Ltd. &Ors. V. Commissioner of CE & ST, J&K- 2021 (5) TMI 28 – CESTAT Chandigarh;
(iv) Accent Pharma vs. CGST Jammu- 2021 (7) TMI-CESTAT Chandigarh;
(v) Modern Insecticides Ltd. Vs. CCE & ST Jammu-2021 (7) TMI-CESTAT Chandigarh;
(vi) Rajindra Industries Vs. Commissioner of CGST Jammu- 2022 (1) TMI-CESTAT Chandigarh.
4. Learned Counsel further submits that the appellants were working under Notification No.02/2010, as per which, refunds/ self-credits in cash over and above CENVAT credit were being allowed by speaking orders after due verification; at no point of time, Department raised any query; it is evident that the practice adopted by the appellant is within the knowledge of the Department and therefore, extended period cannot be invoked. He also relies on CCE, Shillong vs. Jellalpore Tea Estate – 2011) ELT 14 (Gau). and VW India Pvt. Limited vs. CCE Jammu vide Final Order No. 62430/2018 dated 04.06.2018
5. Learned authorised representative for the Revenue submits that the appellants availed Cenvat Credit in respect of inputs purchased from M/s Brite Industries and M/s Rainbow Plastics both working under Notification No. 01/2010-CE(NT) dt. 06/02/2010; Cenvat Credit was not admissible to them before 19/01/2014 on which date Notification No. 01/2010 was included under Rule 12 of Cenvat Credit Rules 2014; the adjudicating authority has correctly denied the credit in view of the legal position. Ld. authorised representative further submits that Rule 12 starts with the words “Notwithstanding anything contained in these Rules”; The said non obstante clause reflects the intent of the Legislature to give it an overriding power over the Rules; in view of the clear provisions of law there is no scope for interpreting or assigning a different meaning as held by the Hon’ble Supreme Court in the case of M/s Dilip Kumar 2018(361) ELT577(SC). He further submits that it was held in the cases of UOI Vs Willowood Chemicals Pvt Ltd. 2022(60) GSTL 3(SC) and veer oversees 2015(18) GSTL 59(TRI-LB) that Tribunal being a creature of the statute cannot travel beyond the provisions of law.
6. Ld. Authorised Representative further submits that the appellant’s contention that without an appeal under Section 35E of the Central Excise Act 1944, demand under Section 11A is not sustainable, is incorrect; reliance on Gellapore Tea Estate 2011 (268) ELT (GAU) and JMW Pvt Ltd. vide final order dt. 04/06/2018 is misplaced. He submits that this is not a case of demand of erroneous refund under Section 11A but is a demand of Cenvat Credit incorrectly availed.
7. Ld. Authorised Representative further submits that the appellant had neither disclosed the fact of availment of credit, on the supplies made by the units working under Notification No. 1/2010, in the ER-I Returns; they did not inform the department in any manner and the omission could only be detected on the conduct of audit. He relies on Sunil HI-Tech Engineers ltd. 2014 (36) STR 40 (TRI-MUM); M/s Mahindra Sons Ltd. 2016-TIOL-1174-CESTAT-MUM; Jabalpur Oxygen Company 1991 (52) ELT 455 and Chemfab Alkalies Ltd. 2010 (251) (ELT) 264 (TRI-CHENNAI). He submits that as held by the Hon’ble Supreme Court in the case of International Auto Ltd 2010 (250) ELT-3 (SC) interest is payable. He further submits that since the appellant has suppressed the relevant fact penalty under Section 11AC is justified.
8. Ld. authorised representative further submits that the appellant’s reliance on Dharampal Satyapal Ltd. (Supra) is not applicable as it pertains to admissibility of Cenvat Credit of NCCD and has been passed without taking into consideration the settled law; Similarly, a case of Perival Palimars (P) ltd.(Supra) is not applicable as the same pertains to Notification No. 56/2002 which was included under Rule 12 and other cases cited by the appellants have been decided on limitation and therefore not applicable to the facts of the instant case.
9. Heard both sides and perused the records of the case. Brief issue involved in this case is as to whether a manufacturer/producer receiver of goods, working under Notification No. 1/2010, can avail Cenvat Credit of inputs purchased from the manufacturers who are also availing the same Notification. The case of Revenue is that Rule 12 of Cenvat Credit Rules does not give any exemption to Rule 1/2010 whereas it specifically gives exemption to Notification No.56/2002 during the relevant period. It is the case of the appellants that the Credit is admissible as the conditions laid down under Rule 3 of Cenvat Credit Rules are complied with and there is no bar under the said Rule for availing Cenvat Credit on Goods supplied by the manufacturers who are availing the Notification No. 1/2010. It is also the case of the appellants that this bench has allowed Cenvat Credit in similar circumstances in the case of Saraswathi Agro Chemicals (India) Pvt Ltd. (Supra) and that the show cause notice is barred by limitations.
10. We find that it is beneficial to have a look at the provisions of law in this regard. Rule 3 of Cenvat Credit Rules Rule 3(1) reads as under:
RULE 3. CENVAT credit:
(1) A manufacturer or producer of final products or a provider of output service shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of-(1) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;
[Provided that CENVAT credit of such duty of excise shall not be allowed to be taken when paid on any goods-
(a) in respect of which the benefit of an exemption under Notification No. 1/2011-C.E., dated the 1st March, 2011 is availed; or
(b) specified in serial numbers 67 and 128 in respect of which the benefit of an exemption under Notification No. 12/2012-C.E., dated the 17th March, 2012 is availed;]
10.1. Rule12 of Cenvat Credit, Rules 2004 reads under as under:
Rule 12. Special dispensation in respect of inputs manufactured in factories located in specified areas of North East region, Kutch district of Gujarat, State of Jammu and Kashmir and State of Sikkim-Notwithstanding anything contained in these rules but subject to the proviso to clause (i) of sub rule (1) of the rule 3, where a manufacturer has cleared any inputs or capital goods, in terms of notifications of the Government of India in the Ministry of Finance [Department of Revenue) No.32/99-Central Excise, dated the 8th July, 1999 (G.S.R. 508(E), dated the 8th July, 1999) or No.33/99- Central Excise, dated the 8th July, 1999 (G.S.R. 509(E), dated the 8th July. 1999] or No.39/2001-Central Excise, dated the 31st July, 2001 (G.S.R. 565(E), dated the 31st July, 2001) or notification of the Government of India in the erstwhile Ministry of Finance and Company Affairs (Department of Revenue) No.56/2002-Central Excise, dated the 14th November, 2002 [G.S.R. 764(E), dated 14th November, 2002] or No.57/2002-Central Excise, dated the 14th November, 2002 | GSR 765(E), dated the 14th November, 2002) or notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 56/2003-Central Excise, dated the 25th June, 2003 (G.S.R. 513 (E), dated the 25th June, 2003) ог 71/2003-Central Excise, dated the 9th September, 2003 (G.S.R.717 (E), dated the 9th September, 2003 or No.20/2007-Central Excise, dated the 25th April, 2007 | GSR 307 (E), dated the 25th April, 2007), the CENVAT credit on such inputs or capital goods shall be admissible as if no portion of the duty paid on such inputs or capital goods was exempted under any of the said notifications.
11. 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. It is the argument of the department that Rule 12 starts with a non-obstante clause and therefore has provisions overriding Rule 3(1). It is the case of the appellants that though Rule 12 starts with a non-obstante clause, it is subject to the provisions of Rule 3(1) and as long as there is no bar under Rule 3(1) of Cenvat Credit Rules, 2004, Credit cannot be denied for the reason that Notification No. 1/2010 is not listed under Rule 12. The appellant further contended that Notification No. 1/2010 was included under Rule 12 with effect from 19/01/2014 by the amending Notification No. 2/2014; as Notification No. 56/2002 was already mentioned under Rule 12, the mention of Notification No. 1/2010 with effect from 19/01/2014 requires to be construed to have a retrospective effect.
12. It is the argument of the Ld. Authorised Representative that unless otherwise specified, a notification has to be considered only prospectively. When there is no confusion, Legislative intent cannot be read into otherwise clear words of the statute. We find that the argument of the Ld. authorised representative is acceptable. If the Notification No. 1/2010 is not listed under Rule 12 before 19/01/2014, it cannot be assumed that it will have the retrospective effect and during the period 1/05/2012 to 19/11/2014 also the credit is admissible even when the suppliers availed the Notification 1/2010. As contended by the Department when the Notification is clear one cannot read into the notification and the Legislative intent behind it. Moreso, CESTAT, being a creature of statute, has no mandate to read the legislative intent. We find that Hon’ble Supreme Court in the case of Dilip Kumar and Co. (Supra) held that taxing statutes should be interpreted strictly by holding as follows:
13. After thoroughly examining the various precedents some of which were cited before us and after giving our anxious consideration, we would be more than justified to conclude and also compelled to hold that every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provision, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State.
13. In view of the above, we are not inclined to accept the contention of the appellants. We find that 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. Therefore, we are of the considered opinion that 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.
14. Coming to the issue of limitation, we find that Revenue is attempting to invoke extended period alleging that the 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. We find that the argument is incorrect. 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, we find that suppression cannot be alleged. We find that 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, we are of the considered opinion that the appellants succeed on limitation.
15. In view of the above, we hold that the appellant has not made out any case on merits. However, they succeed on limitation. The appeal therefore, is allowed on limitation.
(Order pronounced in the open Court on 02/04/2024)
