2025 (6) TMI 762 - AT - Central Excise

Availment and utilisation of ineligible credit - duty paying documents - eligibility to avail the input credit on imported goods based on invoices issued by a dealer who is not registered as an importer consequent to the amendment in Rule 9 of the Central Excise Rules 2002 vide notification No.8/2014-CE (N.T) dated 28.02.2014 - Department was of the view that an existing dealer cannot dispose off the stock of imported excisable goods where the Cenvat credit is being passed on without obtaining registration under category of importer from Central Excise - extended period of limitation. HELD THAT - On a bare reading of the amended Rule 9 of the CER 2002 it is unable to decipher any mandate flowing therefrom requiring a dealer who is already registered as a dealer with the Department and issuing invoices for the excisable goods that he trades in upon which the recipient can avail cenvat credit to yet again obtain a separate registration as an importer . The amendment made to the rule 9 ibid vide notification 8/2014 ibid only requires that an importer who issues an invoice on which CENVAT credit can be taken shall get registered. Any room for interpretative confusion that may have prevailed has been decisively obliterated by the said Notification read in conjunction with the Board Circular. The intent and purpose are clear. An assessee who conducts business both as an importer and a First Stage Dealer may take only one registration as he has been exempted from the requirement of taking a second registration. The requirement to register in so far as a First Stage Dealer who is also an importer is concerned is at the option of the assessee and any assessee needing separate registration for his own business purposes may so register. The notification and the circular make it amply clear without room for any doubt whatsoever that there is no requirement for a First Stage Dealer who is already registered with the Department to take yet another separate registration as an importer. Thus there is no diktat in the amended Rule 9 of the CER 2002 that would require a first stage dealer who is duly registered with the Department and entitled to issue invoices on which cenvat credit can be availed to yet again obtain a separate registration merely because he also chooses to import goods and to trade in them - when such invoices issued by the person as a first stage dealer are also prescribed documents as per the extant provisions of Rule 9(1)(a) (iv) of the Cenvat Credit Rules 2004 to avail cenvat credit. Thus the benefit of cenvat credit availment on the invoices received by the appellant in the instant case from its unit at Raigad cannot be denied to the appellant. The show cause notice as well as the impugned order in original concedes that the Appellant is a dealer duly registered with the Department. It is also undisputed that the invoices issued by the appellant are in accordance with Rule 11 of the CER 2002 - when Rule 9(1)(a)(iv) of the Cenvat Credit Rules 2004 stipulate that cenvat credit shall be taken by the manufacturer on the basis of an invoice issued by a first stage dealer or a second stage dealer as the case may be in terms of the provisions of Rules 2002 and when there is no dispute as the duty paid nature of the invoice or receipt of the inputs covered thereunder and use thereof the credit taken by the appellant is even otherwise not deniable on merits. When the appellant brought the notification and the circular to the authority s notice along with the binding decisions of the Tribunal governing the issue judicial discipline warranted that the adjudicating authority adhere to the same and ought to have extended the benefit to the appellant. Thus the adjudicating authority committed an egregious error in denying the benefit of the notification and circular to the appellant even after the binding decisions of this Tribunal were brought to the authority s attention. Conclusion - i) A registered dealer is not mandatorily required to obtain separate importer registration for issuing invoices on imported goods for Cenvat credit purposes. ii) Invoices issued by a first stage dealer are valid documents for availing Cenvat credit under Rule 9(1)(a)(iv) of the Cenvat Credit Rules 2004. iii) Extended period of limitation can only be invoked in cases of deliberate suppression or fraud not mere procedural lapses. Appeal allowed.

Summary

The core legal questions considered in this judgment are:

1. Whether the appellant, a registered dealer under Central Excise, is required to obtain a separate registration as an importer to issue invoices on imported goods enabling the recipient to avail Cenvat credit, consequent to the amendment in Rule 9 of the Central Excise Rules, 2002 by Notification No. 8/2014-CE (NT) dated 28.02.2014.

2. Whether the invoices issued by the appellant's unit, registered only as a dealer and not as an importer, qualify as valid documents for availing Cenvat credit on imported inputs.

3. Whether the Department was justified in invoking the extended period of limitation for demand of duty under Section 11A(4) of the Central Excise Act, 1944.

4. The applicability and retrospective effect of Notification No. 30/2016-CE (NT) dated 28.06.2016 and Circular No. 1032/20/2016-CX dated 28.06.2016 clarifying the registration requirements for first stage dealers and importers.

Issue-wise Detailed Analysis

Issue 1 & 2: Requirement of Separate Importer Registration and Validity of Dealer Invoices for Cenvat Credit

The legal framework revolves around Rule 9(1) of the Central Excise Rules, 2002, as amended by Notification No. 8/2014-CE (NT). The Rule mandates that every person who produces, manufactures, carries on trade, holds private store or warehouse or otherwise uses excisable goods or an importer who issues an invoice on which Cenvat credit can be taken shall get registered. The Department's contention was that a dealer who also deals in imported goods must obtain a separate importer registration to issue valid invoices for Cenvat credit purposes.

The appellant contended that the existing dealer registration suffices for issuing invoices on imported goods and that there is no statutory requirement for dual registration. The appellant relied on the plain language of Rule 9(1), which distinguishes between a dealer and an importer, requiring registration only for importers who issue invoices for Cenvat credit. Further, Rule 9(1)(a)(iv) of the Cenvat Credit Rules, 2004 explicitly recognizes invoices issued by first stage dealers as valid documents for credit availment.

The Court examined Notification No. 30/2016-CE (NT) and Circular No. 1032/20/2016-CX, both dated 28.06.2016, which clarify that a person registered as a first stage dealer need not obtain separate registration as an importer and vice versa. The circular further allows for optional single registration and filing of a single return covering both roles. The Tribunal interpreted these instruments as clarificatory, removing any ambiguity about the need for dual registration.

The Court rejected the Department's interpretation that the amendment to Rule 9 imposed a mandatory dual registration requirement. It held that the amended Rule 9 only requires importers issuing invoices for Cenvat credit to be registered, and a dealer already registered can issue such invoices without additional registration. The invoices issued by the appellant's Raigad unit, a registered dealer, were therefore valid for availing Cenvat credit on imported inputs.

The appellant's reliance on case law supporting this interpretation, including decisions by this Tribunal and the Assistant Commissioner's orders in the appellant's favour for subsequent periods, was noted. The Court emphasized that the invoices complied with Rule 11 of the Central Excise Rules, 2002, and there was no dispute regarding the duty paid nature of the goods or their receipt and use.

Issue 3: Justification for Invoking Extended Period of Limitation

The Department invoked the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944, on the ground that the appellant had taken credit on ineligible invoices and that the irregularity was detected only on verification. The appellant argued that the extended period invocation was unsustainable as there was no deliberate or willful suppression or fraud.

The Court referred to settled principles that extended limitation applies only in cases of fraud, suppression, or willful misstatement. Since the appellant was a registered dealer issuing invoices in accordance with the rules and there was no evidence of deliberate concealment, the extended period invocation was held to be unjustified. The Court relied on the Supreme Court decision in Uniworth Textiles Ltd. vs C.C.E., Raipur, which supports this principle.

Issue 4: Retrospective Effect of Notification and Circular

The Department contended that the Board's Circular dated 28.06.2016 could not be applied retrospectively. The appellant argued that the circular and notification were clarificatory and beneficial, thus applicable retrospectively.

The Court held that beneficial circulars and notifications clarifying existing law are to be applied retrospectively, citing the Supreme Court decisions in Suchitra Components Ltd. v. CCE and Government of India v. India Tobacco Association. The Court interpreted the term "henceforth" in the circular as relating only to the option of filing a single return and not as limiting the retrospective applicability of the clarification on registration requirements.

Treatment of Competing Arguments

The Court carefully analyzed the Department's reliance on the 2016 circular's prospective application and the requirement of dual registration but found these arguments unpersuasive in light of the plain language of the rules, the clarificatory nature of the notification and circular, and binding judicial precedents. The appellant's arguments regarding the sufficiency of dealer registration and validity of invoices were accepted. The Court also criticized the adjudicating authority for disregarding binding Tribunal decisions and the appellant's submissions, describing it as judicial indiscipline contributing to protracted litigation.

Conclusions

The Court concluded that:

• The appellant's unit, registered as a dealer, was not required to obtain separate importer registration to issue invoices for imported goods enabling Cenvat credit.
• The invoices issued by the appellant's Raigad unit were valid documents for availing Cenvat credit on imported inputs.
• The extended period of limitation invoked by the Department was unjustified as there was no evidence of deliberate suppression or fraud.
• The Notification No. 30/2016-CE (NT) and Circular No. 1032/20/2016-CX are clarificatory and apply retrospectively.
• The impugned Order-in-Original confirming demand, interest, and penalty was unsustainable and liable to be set aside.

Significant Holdings

The Court stated verbatim:

"On a bare reading of the amended Rule 9 of the CER, 2002, we are unable to decipher any mandate flowing therefrom requiring a dealer who is already registered as a 'dealer' with the Department and issuing invoices for the excisable goods that he trades in, upon which the recipient can avail cenvat credit, to yet again obtain a separate registration as an 'importer'."

"The notification and the circular make it amply clear, without room for any doubt whatsoever, that there is no requirement for a First Stage Dealer who is already registered with the Department to take yet another separate registration as an importer."

"We also hold that in the instant case, the SCN does not bring out any positive act on the part of the appellant that can be construed as a deliberate or wilful act of suppression or misstatement of facts with intent to evade payment of duty, and thus the invocation of the extended period of limitation is wholly untenable."

"We are of the considered view that the Notification and the Circular are clarificatory in nature and apply retrospectively."

"The adjudicating authority committed an egregious error in denying the benefit of the notification and circular to the appellant even after the binding decisions of this Tribunal were brought to the authority's attention."

Core principles established include:

• A registered dealer is not mandatorily required to obtain separate importer registration for issuing invoices on imported goods for Cenvat credit purposes.
• Invoices issued by a first stage dealer are valid documents for availing Cenvat credit under Rule 9(1)(a)(iv) of the Cenvat Credit Rules, 2004.
• Clarificatory notifications and circulars beneficial to the assessee apply retrospectively.
• Extended period of limitation can only be invoked in cases of deliberate suppression or fraud, not mere procedural lapses.
• Adjudicating authorities must adhere to binding Tribunal decisions to maintain judicial discipline and avoid protracted litigation.

Final determinations were that the appellant's appeal succeeds on merits and limitation grounds, the demand and penalty confirmed by the adjudicating authority are set aside, and consequential relief, if any, is granted in favor of the appellant.