TMI Blog2022 (1) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the fabrication work of Storage Tanks was completed only in the year 2007. It needs 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, is also not relevant as the eligibility of inputs received by the appellant 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 the appellant under the erstwhile rule 57(T) of the 1944 Excise Rules. Copies of these declarations have been filed and from the same it is clear that the HR sheets under Steel Plates had been declared to the Department. The Commissioner, on his own, examined as to whether the appellant was eligible to avail and utilize CENVAT credit under rule 11 or rule 3(2) of the 2004 Credit Rules. It needs to be noted that the appellant had not made any such claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit till the setting up of the refinery was completed. The appellant, therefore, applied for registration on 08.11.2006 when the refinery was ready for manufacture of the final products. 6. The appellant thereafter availed CENVAT credit on the steel plates required for manufacture of capital goods in its factory as inputs in terms of rule 3(1) of the 2004 Credit Rules. According to the appellant, the said credit could be availed only after the fabrication of Tanks/LPG spheres was completed in the year 2007. However, it took some time to collate and map the actual quantity of steel plates issued and consumed in the fabrication of the Storage Tanks/LPG spheres. According to the appellant, it collated grade wise and item wise steel plates made available to the sub-contractors against specific work orders and this was done with the relevant invoices/bills of entry, goods receipt notes and issue slips. It was only when such correlation was complete that the appellant availed the credit. According to the appellant, there was no upper time limit prescribed for availing credit under the 2004 Credit Rules at the relevant time. 7. The appellant was, however, issued a show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer ceases to manufacture exempted goods or the goods manufactured by him become exciseable. According to the notice, the appellant was not entitled to credit under rule 3(2) of 2004 Credit Rules as it had failed to establish that the inputs in respect of which it took credit were lying in stock on the date of registration. 9. The show cause notice also alleges violation of rule 9(5) of the 2004 Credit Rules as the appellant had not produced documentary evidence in the form of relevant invoices/records showing receipt, issuance, consumption and proper accounts of inputs on which credit was availed. It further alleges that in terms of rule 4(1) of the 2004 Credit Rules, credit was required to be taken immediately on receipt of the inputs in the factory but in the instant case the same had been availed after 11 years from the date of receipt and 4 years from the date of taking registration. 10. The appellant filed a detailed reply to the show cause notice and denied all the chargers levied against the appellant. The appellant contended that it had rightly availed the CENVAT credit and that neither interest could be charged nor penalty could be imposed. 11. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particular set of rules for determining the eligibility to Cenvat credit and hold that the relevant set of rules in this case would be Cenvat Credit Rules, 2004, which were vogue when the Noticee become a Central Excise registrant in November, 2006. 25. Now examining the whole issue in the context of Cenvat Credit Rules, 2004, I find that Rule 3 of Cenvat Credit Rules, 2004 allows taking of the Cenvat credit by a manufacturer or producer of final products of various kinds of duties specified under sub-rule (1) of Rule 3 ibid paid on any inputs received in the factory of manufacturer of final products on or after 10 th day of September, 2004. This Rule lays down a cut-off date for receipt of the inputs in the factory of manufacture i.e. 10th day of September, 2004 for determining the eligibility of Cenvat credit. 26. However, sub-rule (1) of Rule 11 of Cenvat Credit Rules, 2004, provides that any amount of Cenvat Credit earned by the manufacturer under Cenvat Credit Rule, 2002 as they existed prior to 10 th day of September, 2004 and remaining unutilized on that date shall be allowed as Cenvat credit to such manufacturer and be allowed to be utilized in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove even if they were used in the fabrication of capital goods. It will also be not out of place to mention that even such capital goods i.e. tanks lying in stock were not declared to the department as on the date of taking Central Excise registration. Even otherwise, the steel plates had lost their identity and what were lying in stock would have been tanks only. Had they intended to claim any Cenvat credit on tanks, then they should have produced evidence of duty payment on such tanks. However, nothing of that sort has been done. Therefore, the claim on this ground is also liable for rejection. 34. With reference to the charge relating to violation of Rule 4(1) of Cenvat Credit Rules, 2004, I find that the said rule provided for taking Cenvat credit immediately on receipt of inputs. For a new assessee- manufacturer, it can be construed as taking credit at the time of registration or receipt of goods. The word immediately connotes a reasonable time gap between the receipt of inputs and taking credit but this time gap has to be reasonable only and cannot be extended up to 13 years from the date of receipt of steel plates and more than 4 years from the date of obtaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of petroleum products. Even otherwise, these steel plates that were received in 1997/1998 were no longer in existence in stock on the date central excise registration was taken in November 2006 as the same had already been consumed for fabricating Storage Tanks. Therefore, CENVAT credit cannot be granted even under rule 3(2) of the 2004 Credit Rules; iv. Steel plates used in fabrication of Storage Tanks cannot be turned as capital goods ; v. Rule 4(1) of the 2004 Credit Rules provides for taking CENVAT credits immediately on receipt of inputs, but in the present case credit was taken after a long gap which cannot be said to be reasonable; vi. The goods cannot be confiscated and, therefore, redemption fine cannot be imposed; and vii. As the appellant had taken CENVAT credit wrongly in contravention of the provisions of the 2004 Credit Rules, it would be liable for penalty under rule 15(1) of the 2004 Credit Rules. 15. The Department has filed an appeal alleging that interest should also have been levied by the Commissioner under rule 14 of the 2004 Credit Rules. 16. Shri Vipin Jain, Shri Vishal Aggarwal and Ms. Dimple Gohil learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les immediately upon the receipt of the inputs in the factory. The decisions of the Tribunal in Coromandel Fertilizers Ltd. vs. Commr. of C.Ex. (A), Vishakhapatnam-IV [ 2009 (239) E.L.T. 99 (Tri. Bang.) ] and Steel Authority of India Ltd. vs. Commissioner of C.Ex., Raipur [ 2013 (287) E.L.T. 321 (Tri.-Del.) ] have been relied upon; vii. The Commissioner committed an error in holding that the appellant was not eligible to avail and utilize credit under rule 11 or rule 3(2). The appellant had not made any claim for credit under rule 11 or rule 3(2); viii. The Commissioner erred in imposing equivalent penalty under rule 15(1) of the 2004 Credit Rules as penalty could have been imposed only if credit was taken wrongly in contravention of the provisions of the 2004 Credit Rules; and ix. The contention of the Department in the appeal filed by it that the Commissioner should also have ordered recovery of interest under rule 14 of the 2004 Credit Rules is not tenable as the said rule can be invoked only when CENVAT credit has been taken or utilized wrongly. 17. Shri S.N. Gohil, learned authorized representative appearing for the Department h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2006, as it had earlier been informed that CENVAT credit could be availed by the appellant only after the refinery was setup. 20. The Commissioner has accepted the contention of the appellant that the eligibility to take CENVAT credit has 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 has to be construed as the relevant date for deciding eligibility of credit, the Commissioner held that the appellant 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. The Commissioner could not have arrived at this conclusion after having recorded a finding that it is only on the grant of central excise registration that the factory comes into existence, which date in the present case, is on 08.11.2006. 21. The show cause notice issued the appellant also stated that the eligibility to take credit was required to be examined in accordance with the 1944 Excise Rules and that the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nputs so as to cover goods used not only for the mainstream manufacturing but also to something which is used for rendering the final product marketable or something used otherwise in the manufacturing process. 25. The Commissioner also committed an error in holding that CENVAT credit was not admissible for the reason that the steel plates were not in existence on the date the central excise registration was granted in November 2006, since by that time they had been consumed in fabrication of the Storage Tanks. There is no requirement that the goods on which credit is being availed should be received in the same form as on which the duty has been paid. There is no provision in the Rules which denies CENVAT credit merely on the ground that the form in which the goods were received was different. 26. In this connection, reference can be made to the decision of the Tribunal in Beico Industries Pvt. Ltd. The relevant paragraphs are reproduced below: 2. The relevant facts that arise for consideration are the appellant herein had availed Cenvat credit of the central excise duty paid on certain capital goods and service tax on input services which were received prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Service Tax paid, would be travesty of justice, more so when the assessee herein is discharging appropriate excisable duty on the finished goods cleared after taking the registration certificate. ******* 27. In Essar Oil Ltd., the Tribunal allowed CENVAT credits on inputs such as enamels, paints, polyester resins, electrodes and chemicals which were used/consumed during the installation/erection or setting up of the factory. 28. The Commissioner also held that the appellant had not furnished details of inputs in stock even though, the same details were requested in the letter dated 22.02.2007. 29. What was required to be made available by the said letter were copies of all duty paying documents such as invoices, Bills of Entry on which MODVAT credit had been availed. The appellant was also asked to submit stock of inputs on which credit was availed as on the date of registration. According to the appellant, the information that was sought was, therefore, in the context of credit availed in the month of November 2006. These details were furnished by the letter dated 02.04.2007. The appellant had not availed credit on steel plates at that point of time and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as Annexure A 02. Statement of Cenvat Credit availed during February 2010 on Steel plates procured indigenously during 1997-1998. The statement also reflects the Grade Wise / Item Wise details for material received against each Invoice and the same is attached as Annexure B 03. Summary of Cenvat Credit availed Grade Wise / Item Wise on indigenous items procured and consumed. The same is marked as Annexure C Also, we wish to place on record the following documentary evidence obtained reconciled before availment of Cenvat Credit to ensure that the Cenvat credit was availed only on the quantum of Inputs issued and consumed in the fabrication activity. 04. Statement of Grade Wise / Item Wise issues against respective Work Orders for fabrication of Tanks and marked as Annexure-D 05. Statement of Item wise material retuned by the Contractor against respective Work order and marked as Annexure E 06. Consolidated statement of Grade wise material showing net quantity consumed by the Contractor for fabrication of Storage Tanks. The quantum of net material consumed is after deducting the balance material returned by the Contractor from the issues made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for allowing CENVAT credit. (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of input service. 35. In the context of rule 57AC of the Central Excise Rules, the Central Board of Excise and Customs had issued a Circular dated 29.08.2000, clarifying as follows: 10. Rule 57AC provides that CENVAT credit may be taken immediately on receipt of inputs in the factory. Some apprehensions have been expressed that if the CENVAT credit is not taken immediately , like within 24 hours or so, the field officers may deny the CENVAT credit. The idea is that if the manufacturer desires he can take the CENVAT credit at the earliest opportunity when the inputs are received in the factory. This, however, does not mean, nor is it even intended that if the manufacturer does not take credit as soon as the inputs are received in the factory, he would be denied the benefit of CENVAT credit. Such an interpretation is not tenable. 36. A Division Bench of the Tribunal in Coromandel Fertilizers Ltd., did not accept the view taken by the Department that credit cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not prescribed any outer time limit. In view of this, we do not find any merit in the impugned order. We set aside the same and allow the appeal with consequential relief. (emphasis supplied) 37. In Steel Authority of India Ltd., the Tribunal after taking notice of the CBEC Circular dated 29.08.2000 and the provisions of rule 4(1) of the 2004 Credit Rules, observed as follows: 6. We have carefully considered the submissions from both the sides and perused the records. The undisputed facts in this case are that while the inputs in respect of which the disputed amount of Cenvat credit had been taken had been received during April, 2000 to December, 2006 period, the credit was availed only during Jan. 2007 to March, 2007 period. ******* The point of dispute is as to whether the Cenvat credit can be denied if an assessee does not avail the Cenvat credit in respect of certain inputs immediately on their receipt. ******* 8. From a plain reading of the above provisions, it is clear that what the Rules prescribes is that a manufacturer can avail Cenvat credit in respect of certain inputs immediately on their receipt and there is no time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 41. 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, is also not relevant as the eligibility of inputs received by the appellant 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 the appellant under the erstwhile rule 57(T) of the 1944 Excise Rules. Copies of these declarations have been filed and from the same it is clear that the HR sheets under Steel Plates had been declared to the Department. 42. The Commissioner, on his own, examined as to whether the appellant was eligible to avail and utilize CENVAT credit under rule 11 or rule 3(2) of the 2004 Credit Rules. It needs to be noted that the appellant had not made any such claim for availing the credit. 43. It is, therefore, not possible, for the reasons sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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