M/S. Shree Cement Ltd vs Commissioner Of Central Excise

[Arising out of Order-In-Appeal No. 213(VC)CE/JPR-I/2013 dated 03/01/2014 passed by Commissioner of Central Excise, (Appeals), Jaipur]

For approval and signature:

Honble Mr Ashok Jindal, Member (Judicial)

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether Their Lordships wish to see the fair copy of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. Shree Cement Ltd. Appellants

Vs.

Commissioner of Central Excise Respondent

Jaipur

Appearance:

Shri Bipin Garg, Advocate for the Appellants

Ms. Ranjana Jha, AR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing /decision: 29.06.2015

ORDER NO. FO/ 52131 /2015-Ex(SM)

Per Ashok Jindal :

The appellant is in appeal against the impugned order denying cenvat credit on the premise that as the production in the appellants factory was started on 4.2.2010 and the ISD distributed the cenvat credit to the appellant prior to the start of their production and the said cenvat credit stand utilized for payment of duty for the month of March, 2010. Therefore, the appellant is not entitled to take cenvat credit on service tax on cargo handling service which has been distributed to them by their head office prior to start of production.

2. Heard the parties.

3. Learned Counsel for the appellant submits that in this case there is no restriction under Rule 3 of Cenvat Credit Rules, 2004 for availing Cenvat credit prior to start of manufacture and for their utilization. The conditions have been laid down under Rule 7 of Cenvat Credit Rules, 2004 for the ISD distribution of the cenvat credit and Rule 3 provide that an assessee who was the manufacturer or producer of final product is entitled to take cenvat credit on the service tax and the same can be utilized for payment of duty. Therefore, they have correctly taken the cenvat credit. He also relied on the decision of CCE, Bangalore 1 vs. Ecof Industries Pvt. Ltd. [2011 (271) ELT 58 (Kar)] and CCE, Bangalore 1 vs. Ecof Industries Pvt. Ltd. [2012 (277) ELT 317 (Kar)].

4. He further submits that in this case, the show cause notice has been issued by invoking extended period of limitation only on 19.6.2012 and the adjudicating authority refrained from imposition of penalty on the ground that this issue relates to interpretation of Rules, therefore penalty was dropped. But the learned Commissioner (Appeals) took the contrary view. The appellant challenged the impugned order and submitted that extended period of limitation is not invokable in the facts of this case.

5. On the other hand, learned AR opposed the contention of the learned Counsel and submits that the appellant has taken cenvat credit prior to start of manufacturing activity and asked how without manufacturing activity, they can take cenvat credit. Therefore, she prayed to upheld the impugned order and reiterated the finding of the learned Commissioner (Appeals). She further submits that in this case, the appellant company before start of manufacture or production is not entitled to avail cenvat credit and Commissioner (Appeals) has rightly denied it on the ground that it came to the knowledge of the department only during the course of audit and therefore, extended period is rightly invoked. She also submits that decision relied upon by the learned Counsel are not relevant to the facts of this case.

6. On careful consideration of the submissions made by both the sides, I find that Rule 7 of Cenvat Credit Rules, 2004 deals with the manner of distribution of cenvat credit by ISD which is reproduced as under:

RULE [7.?Manner of distribution of credit by input service distributor.  The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following conditions, namely :

(a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; or

(b) credit of service tax attributable to service used in a unit] exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed

7. As per Rule 7 ibid, there are two restrictions under the said Rule that the cenvat credit cannot be distributed more than the service tax paid and credit should be used by a manufacturing unit of excisable goods. Further, Rule 3 of the Cenvat Credit Rules provides that manufacturer of the final products shall be allowed to take Cenvat Credit. Sub rule 4 of Rule 3 of Cenvat Credit Rules, also state that cenvat credit can be utilized for payment of excise duty on final product.

8. A plain reading of both the Rules clarifies that there is no restriction to the effect that if any assessee avail cenvat credit on procurement of inputs (prior to start of manufacture), is not entitled to take cenvat credit. Infact, without procuring inputs, or some inputs service, assessee cannot start manufacturing activity. Therefore, it cannot be said that an assessee who is a manufacturer of excisable goods is to be denied the cenvat credit of duty paid on inputs or input service availed prior to start of manufacturing activity. In these circumstances, I do not find any merits in the arguments advanced by the learned AR. Infact both the Rules, provide that the manner and how the assessee is entitled to take cenvat credit, therefore, I find that appellant has correctly taken the cenvat credit.

9. On limitation also, the adjudicating authority has held that it is an issue of interpretation of Rules and certain decisions are in favour of the appellant, therefore, the adjudicating authority refrain from imposing any penalty under Section 11AC of the Act. Section 11 AC of the Act deals the situation to impose penalty when the assessee has committed any fraud, collusion or made willful mis- statement or suppressed any fact or contravened provisions of Act /Rules to evade payment of duty. Section 11 A of the Act also empowers to invoke extended period of limitation when the provisions of section 11AC of the Act are attracted. When the adjudicating authority held that it is an issue of interpretation of Rule, therefore it cannot be alleged that appellant has taken cenvat credit by way of fraud, collusion, willful mis statement, suppression of fact or contravened the provisions of Act/ Rule with an intent to evade payment of duty. Further, in the impugned order, learned Commissioner (Appeals) has himself has recorded that the appellant has stated that show cause notice is barred by limitation because there was no suppression on their part and have also cited various legal pronouncements in support of their submissions. Learned Commissioner (Appeals) has also dealt with the issue of certain decisions in favour of the appellants and also held that the appellant took the credit before start of manufacture and thus contravened the provisions of Act /Rule. It is correct that he should have known all the Rules / provisions of Rules, Act but there are omission on the part of the appellant for invoking extended period of limitation which is absent in this case. Therefore, extended period of limitation, is also not invokable in the facts of this case. In these circumstances, I hold that the appellant is having the case on merits as well as on limitation. Therefore, I set aside the impugned order and allow the appeal with consequential relief, if any.

(Dictated and pronounced in the open court )

( Ashok Jindal ) Member(Judicial)

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