No time limit in CCRs for taking credit - If manufacturer does not take credit as soon as inputs are received, word 'immediately' in rule 4(1) does not mean nor is it intended to mean that benefit would be denied – Order set aside: CESTAT
By TIOL News Service
MUMBAI, FEB 05, 2013: RULE 4(1) of the CCR, 2004 reads - “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 output service.”
The issue associated with the adverb “immediately” is as old as the credit rules when they first appeared on the horizon but this time there is a twist in the end. A twist which the assessee may find it difficult to unwind and the Revenue would be glad to twist further!
For the record, the CENVAT Credit involved in the case is a whopping Rs.4.79 Crores and the same has been denied to the assessee along with imposition of equivalent penalty and interest on the ground that they did not take the credit on the input “IMMEDIATELY” as mandated in rule 4(1) of the CCR, 2004.
Inasmuch as the appellant had taken credit of Rs.4.46 Crores during the period October 2006 to November, 2006 on the inputs which were received in the factory during the period April, 2004 to September, 2006. Similarly, they had taken credit of Rs.33 lakhs in the month of April, 2009 in respect of the inputs that were received during the years 2005-06, 2006-07 and 2007-08.
There is nothing forthcoming from either end as to the reason for this delay. Money blocked for more than three years and lying only on PAPER!
Anyways, against the orders of the CCE, Belapur and the CCE(Appeals), Mumbai-III who upheld the demands raised, the appellant is before the CESTAT and submits –
+ Circular no. 345/2/2000-TRU dated 29.08.2000 clarifies on term “immediately” thus – “10. …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.”
+ reliance is placed on the favourable decisions in SGS India Pvt. Ltd. (2011-TIOL-979-CESTAT-MUM), Transformers & Rectifiers (2010-TIOL-1194-CESTAT-AHM) and Lubi Electronics (2009-TIOL-2509-CESTAT-AHM).
The Revenue representative after relying upon the findings of the lower authority submitted that in view of the delay in taking the credit it is not possible to verify whether the duty paid inputs are received in the factory and are used in the manufacture of goods cleared on payment of duty hence the demand is rightly made.
The Bench observed –
“8. The Revenue is interpreting the word “immediately” for denying the credit on the ground that the credit has not been taken immediately on receipt of the inputs in the factory. The provisions of Rule 4(1) are interpreted by the Tribunal in the decision of Transformers & Rectifiers (supra) after relying upon the earlier decision of the Tribunal in the case of Essar Steel Ltd. vs. CCE, Surat-I reported in - (2007-TIOL-2005-CESTAT-AHM) and the Board's Circular dated 29.08.2000 and held that the manufacturer can take credit when the inputs are received in the factory and it does not mean nor it is intended that if the manufacturer does not take the credit as soon as the inputs are received in the factory, he would be denied the benefit of CENVAT credit. The Board has also observed that such interpretation is not sustainable. The Tribunal in the case of Pierlite India Pvt. Ltd. vs. CCE, Ahmedabad reported in - (2009-TIOL-2328-CESTAT-AHM) and in the case of Lubi Electronics (supra) relied upon by the appellants, held that no time limit for taking credit is provided in the CENVAT Credit rules, Similarly, the Tribunal in the case of SGS India Pvt. Ltd. (supra), after relying upon the Board's Circular dated 29.08.2000, held that if the manufacturer has not taken credit immediately on receipt of the goods, the manufacturer cannot be deprived of taking of the credit.”
9. In view of the above decisions, we find that the impugned orders whereby the credit was denied on the ground that the same has not been taken immediately on receipt of the inputs are not sustainable hence set aside and consequential penalties are also set aside. As the appellants had availed credit of the duty paid on the inputs and there is a delay in taking credit, therefore, the appellants are to show that the duty paid inputs in question are received in the factory and the same are used in or in relation to the manufacturer of goods cleared on payment of duty. The appeals are disposed of as indicate above. The cross objection is also disposed of in the same terms.”
Let the battle royale begin !
(See 2013-TIOL-216-CESTAT-MUM)
