By TIOL News Service

MUMBAI, DEC, 16, 2016: THE petitioners also have unit/factory at Silvassa and Bhayander. These units are separately registered with the Central Excise Department. The petitioners state that these two units and the petitioners are purchasing inputs independently from various outside suppliers for manufacturing their final products and availing cenvat credit.

To meet urgent requirements, petitioners indulged in what is called as stock transfer. In such cases, inputs which are in stock with the other units were transferred on reversal of appropriate excise duty under the cover of an invoice.

The petitionerswere issued SCN dated 19.04.2007 for recovery of cenvat credit amounting to Rs.7,98,869/- availed on inputs during the period 01.04.2002 to 28.02.2003. The stand of the department was that rule 7 of CCR, 2002 employed the word "purchased" and since the inputs were "stock transferred", credit is not admissible.

The petitioner submitted that the appeal filed was dismissed by the lower authoritieson the ground of limitation/time bar and which fact is accepted. Nonetheless, the petitioner argued that the CCR were amended by notification 13/2003-CE(NT) dated 01.03.2003 and in terms of which the word "purchased" in rule 7 of CCR was substituted by the word "procured".

Inasmuch as it is their contention that the amending provision is clarificatory and would, therefore, operate retrospectively.

The Counsel for the Revenue submitted that as far as the limitation goes, the finding of fact rendered in both orders, namely, that of the Commissioner of Central Excise (Appeals) and the CESTAT does not require any interference as the same is consistent with the statutory provision. However, the counsel fairly stated that in the order of the Joint Commissioner, the above aspect (of whether the amendment is retrospective) has not been discussed and all that is held is that because of the period of availment of the cenvat credit, the amending Notification and the provision will not apply.

The High Court observed -

++ We find that the finding of fact that there is violation of Rule 7(4) read with Rule 13(2) of the CC Rules and that would attract penalty and interest is a finding rendered without adverting to the important contention raised before us, namely, whether the provision in question, as amended, is clarificatory and, therefore, would apply irrespective of the date of clearance or availment of the cenvat credit or will it have prospective operation, namely, from the date of its introduction. That ought to be considered. That issue has not been addressed.

++ We are of the opinion that in the facts and circumstances of the present case and without this order being treated as a precedent for future cases, the impugned demand can be and is accordingly quashed and set aside. However, the Show Cause Notice is kept alive for adjudication. The petitioners shall appear before the Adjudicating Authority on 22.12.2016.

The High Court added - We clarify that we have not held the said provision to be prospective or clarificatory. That issue must be squarely addressed and decided by the authority in terms of our directions.

The Writ Petition was allowed.

(See 2016-TIOL-3030-HC-MUM-CX)