2006 (2) TMI 403 - AT - Central Excise

Interpretation of statute - Amending Notification - Words and Phrases - Effect of Substitutes - Textiles and Garments - Cenvat credit - Demand - Excess credit

Summary

Issues Involved:
1. Liability to pay/reverse excess deemed credit availed.
2. Applicability of Notification No. 35/2003-C.E. (N.T.) vs. Notification No. 47/2003-C.E. (N.T.).
3. Time-bar of the Show Cause Notice (SCN).
4. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Liability to Pay/Reverse Excess Deemed Credit Availed:
The appellants, engaged in manufacturing knitted garments, availed deemed credit as per Rule 9A of the Cenvat Credit Rules, 2002, and Notification No. 35/2003-C.E. (N.T.), dated 10th April 2003. The Revenue issued an SCN demanding the reversal of excess deemed credit, arguing that Notification No. 47/2003-C.E. (N.T.), dated 17th May 2003, should apply. The Tribunal found that Notification No. 47/2003-C.E. (N.T.) amended Notification No. 35/2003-C.E. (N.T.) by substituting the table, thereby including articles of apparel and clothing accessories under Sr. No. 2(d). This substitution was deemed to have retrospective effect from 10-4-2003, making the appellants liable to pay/reverse the excess credit availed.

2. Applicability of Notification No. 35/2003-C.E. (N.T.) vs. Notification No. 47/2003-C.E. (N.T.):
The appellants argued that they availed credit under Notification No. 35/2003-C.E. (N.T.), which was in force at the time. However, the Tribunal noted that Notification No. 47/2003-C.E. (N.T.) was issued to rectify an error in Notification No. 35/2003-C.E. (N.T.) and had a retrospective effect. The Hon'ble Supreme Court's judgment in Government of India v. Indian Tobacco Association supported this interpretation, stating that the amendment intended to rectify a mistake and thus had retrospective operation. Consequently, the appellants had to follow the provisions of Notification No. 47/2003-C.E. (N.T.) for calculating the credit.

3. Time-bar of the Show Cause Notice (SCN):
The appellants contended that the SCN was time-barred as they availed the deemed credit in April 2003, and the SCN was issued in June 2004. The Tribunal found that the appellants, as SSI units, submitted their quarterly ERI returns on or about 5th July 2003. Since the SCN was issued within one year from this date, it was deemed to be within the permissible time frame, and the argument of time-bar was rejected.

4. Imposition of Penalty:
The Tribunal concluded that the issue of availing credit on inputs was a matter of interpreting the notifications. Given the complexity and the subsequent rectification of Notification No. 35/2003-C.E. (N.T.) by Notification No. 47/2003-C.E. (N.T.), the imposition of a penalty was deemed unwarranted. Thus, the penalties imposed on the appellants were set aside.

Conclusion:
The Tribunal upheld the demand for reversing the excess deemed credit availed as per the amended provisions of Notification No. 47/2003-C.E. (N.T.). However, it set aside the penalties imposed on the appellants, recognizing the issue as one of interpretation of the notifications. The orders were pronounced in open court on 15-2-2006.