2010 (8) TMI 243 - AT - Central Excise

Cenvat credit input received from 100% EOU Quantum of credit - Cenvat Credit Rules provides for taking credit based on a formula prescribed under Rule 3(7) of the Cenvat Credit Rules 2004 - The term CVD has not been specifically defined in the Cenvat Credit Rules but it has been explained that BCD & CVD denote ad valorem rates in per cent of basic customs duty and additional duty of customs leviable - taking into account that from 1-3-05 the additional duty levied under Section 3(5) has also been made eligible for credit it would be proper to hold that the term CVD referred to in the formula would refer to both varieties of additional duties leviable under Section 3(1) and 3(5) of the Customs Tariff Act 1975 - there is no justification for invoking extended period for demand and that there is no justification for imposing penalty are acceptable Appeal is allowed

Summary

Issues: Interpretation of legal provisions regarding eligibility for Cenvat credit on additional duties under Customs Tariff Act. Time limitation for demand and imposition of penalty.

Analysis:
1. Interpretation of Cenvat Credit Rules: The case involved a dispute over the interpretation of the term "CVD" in Rule 3(7) of the Cenvat Credit Rules, 2004. The appellants contended that the term should encompass both additional duties leviable under Section 3(1) and Section 3(5) of the Customs Tariff Act. They argued that prior to 1-3-05, all additional customs duties were eligible for credit, and post that date, even duties under Section 3(5) became eligible. The Tribunal examined the relevant legal provisions and held that the term "CVD" should indeed include both types of additional duties, as the context and legislative intent supported this interpretation. The Tribunal relied on the General Clauses Act to conclude that the term could be understood to cover multiple duties when the context demanded it. Therefore, the appellants were deemed eligible for the Cenvat credit on the disputed duties.

2. Time Limitation and Penalty: The appellants also raised the issue of time limitation for raising the demand and the imposition of a penalty. They argued that there was no suppression of information or misstatement on their part, and thus, the demand should be considered time-barred. The Tribunal accepted this argument, noting that the show cause notice was issued on 11-1-08, and any demand beyond the statutory time limit could not be enforced. Additionally, since there was no deliberate concealment or misrepresentation by the appellants, the Tribunal held that no penalty could be imposed. The Tribunal found merit in these contentions and ruled in favor of the appellants on these grounds as well.

3. Conclusion: In conclusion, the Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal, granting the appellants consequential relief as per the law. The judgment clarified the interpretation of the term "CVD" in the Cenvat Credit Rules, affirmed the time limitation for raising demands, and rejected the imposition of a penalty due to the absence of any intentional wrongdoing by the appellants.