Custom, Excise & Service Tax Tribunal
Shree Kailash Textiles P. Ltd vs Cce, Thane, I on 30 September, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/433/12 [Arising out of Order-in- Appeal No. THI/RKS/63/2011 dated 19-12-2011 passed by the Commissioner of Central Excise (Appeals), Mumbai ] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) =======================================================
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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 :
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3. Whether Their Lordships wish to see the fair copy : seen
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4. Whether Order is to be circulated to the Departmental: Yes
authorities?
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Shree Kailash Textiles P. Ltd
:
Appellant
VS
CCE, Thane, I
:
Respondent
Appearance
Shri. Sachin Chitnis, Advocate for the Appellants
Shri. S.V. Nair, Asstt. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 30/9/2016
Date of decision: 20/1/2017
ORDER NO.
The fact of the case is that appellant has availed Cenvat credit on capital goods in the month of March, 2002 which were received by them during the period from December, 2001 to February, 2002 when they were operating under compounded levy scheme on processed textile fabrics under Rule 15 of Central Excise (No. 2) Rules, 2001 read with Notification No. 32/2001 C.E. dated 28-6-2001(w.e.f. 1-7-2001). As per the para 8(5) of the Notification, the independent textile processors opting for the notification shall not be eligible to avail of any credit of duty paid on input or capital goods under the Cenvat Credit Rules, 2001. As per above provisions, the appellant was issued a show cause notice dated 14-3-2005 proposing denial of Cenvat credit. The adjudicating authority confirmed the demand of Rs. 4,25,440 along with interest under Section 11AB of Central Excise Act, 1944. A penalty of Rs. 4,25,440/- was also imposed under Rule, 13 of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. Being aggrieved by the Order-in-Original dated 20-6-2006, the appellant filed appeal before the Commissioner(Appeals) which came to be rejected therefore the appellant is before me.
2. Shri. Sachin Chitnis, Ld. Counsel for the appellant submits that appellant have availed the credit in the month of March, 2002 when there was no restrictions in availing credit. He submits that capital goods on which credit was taken used in March 2002 onward also for manufacture of dutiable goods. Therefore capital goods was not used exclusively for exempted goods. He further submits that appellant before the adjudicating authority as well as Ld. Commissioner(Appeals) strongly submitted that credit was taken in the manufacture of March, 2002, whereas show cause notice was issued in the year 2005 therefore show cause notice invoking extended period is time bar. He placed reliance in case of Nahar Industrial Enterprises ltd Vs. Commr. Of C. Ex. Chandigarh[2004(176) ELT 541(Tri. Del.)].
3. On the other hand, Shri. S.V. Nair, Ld. Asstt. Commissioner(A.R.) appearing on behalf of the Revenue, reiterates the findings of the impugned order.
4. I have carefully considered the submissions made by both sides and perused the record.
5. The fact of the case which is not under dispute is that appellant had received the capital goods during the year 2000-01 when they were working under compounded levy duty scheme, according to which they were not entitle for taking credit on input and capital goods. From March, 2002 the appellant have started payment of duty and they were opted out from the compounded levy scheme. The issue to be decided is whether the credit on capital goods should be considered on the date of its receipt or any date subsequently. This issue has come up in various decisions and there were contrary judgments of this Tribunal. Therefore the matter was referred to the Larger Bench of this Tribunal in case of Spenta International Ltd Vs Commissioner of Central Excise, Thane[2007(216) ELT 133(Tri. LB)] wherein it was held that credit eligibility to be determined with reference to dutibility of the final product on the date of receipt of the capital goods. In the present case on the date of receipt of the capital goods i.e. before March, 2002 the appellant was under compounded levy scheme and as per notification under said provisions the appellant was not entitle to take credit. Therefore after March, 2002 the appellant cannot take credit as the eligibility of the credit should be with reference to the dutibility of the final product on the date of receipt of the capital goods. The relevant para of the Larger Bench is reproduced below:
7.In the case of? Binani Cement Ltd. v. CCE, 2002 (143) E.L.T. 577, the Tribunal held that vested right of taking credit arises on the date of receipt of the goods and that the date of installation of capital goods being only a deferred date of taking credit, for administrative reasons, credit is eligible on the date of receipt of the goods. In CCE v. Sengunthar Spinning Mills, 1998 (99) E.L.T. 409, it was held that the availability of Modvat credit on capital goods has to be determined at the time of receipt of capital goods in the factory and if no modvat credit was available at that time, the question of subsequently making available any Modvat credit would not arise.
8.The recent decision of the Tribunal? in CCE v. Precot Mills Ltd., 2007 (212) E.L.T. 483 follows the Surya Roshni decision and the Grasim Industries decision as well as the Sengunthar decision, to hold that the relevant date for determination of availability of Modvat credit is the date of receipt of capital goods in the factory and if on that date no credit was available, it cannot be allowed subsequently. It was held that when the machinery in respect of which the capital goods had been taken, were not used for manufacture of dutiable goods on the date of receipt in the factory, capital goods credit is not available on such machinery.
9.The? ACE Timez decision reported in 2004 (170) E.L.T. 371, which takes a contrary view from those set out above, considers Rules 4(2)(a) & (b) of the Cenvat Credit Rules, 2002 and holds that these rules do not provide for denial of credit on the ground that it is not taken in the same financial year in which capital goods were received, and only restricts credit to 50% of the duty paid, in the financial year of receipt of capital goods, and do not provide for lapsing of credit if the balance 50% is not taken in the same financial year in which the capital goods were received. The above judgment does not consider Rule 6(4) of the Cenvat Credit Rules, which clearly stipulates that no credit shall be allowed on capital goods used exclusively in the manufacture of exempted goods. In other words, the ACE Timez decision discusses the manner in which credit to be availed as per Rule 4(2)(a) & (b) and does not discuss eligibility in terms of Rule 6(4). Moreover, the ACE Timez decision does not consider the Tribunals earlier decisions in Surya Roshni and Grasim Industries.
?10.In the light of the above discussion, we answer the reference by holding that Cenvat credit eligibility is to be determined with reference to the dutiability of the final product on the date of receipt of capital goods.
11.The papers are now returned to the? referral Bench for further orders.
From the answer given by the larger bench in the above judgment which is clear that the appellant at the time of receipt of the capital goods was not legally entitle for Cenvat credit therefore at later stage also they are not eligible for Cenvat credit on the capital goods. As regard the issue raised by the appellant on limitation, I find that appellant have availed cenvat credit in the month of March, 2002 and department was not aware that whether the said capital goods received in March, 2002 or prior to that, therefore credit details shown in the monthly return does not help the appellant that there is no suppression of facts particularly as regard to receipt and installation of the capital goods, therefore the extended period of demand correctly invoked. As per my above discussion, the impugned order is upheld and appeal is dismissed.
(Order pronounced in Court on _________________ ) Ramesh Nair Member (Judicial) sk 6 E/433/12