CESTAT Declares Full CENVAT Credit Admissible on Flexographic Plates in Subsequent Financial Year [Read Order]

The Mumbai Bench of Customs,Excise and Service Tax Appellate Tribunal (CESTAT) declares full Cenvat credit on flexographic plates admissible, ruling that the remaining 50% credit could be claimed in subsequent financial years, and denying the credit at the time the show cause notice was issued was not in accordance with the law.

Tetra Pack India Pvt. Ltd,appellant-assessee,manufactures aseptic packaging of aluminium paper and is registered for Central Excise, paying duties and availing Cenvat credit. The assessee used flexographic plates on VT-100 Flexo printing machines to print designs on paper. Some plates were imported and classified under Chapter 37 of the Customs Tariff, allowing the appellant to claim Cenvat credit.

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The Revenue argued that the flexographic plates were components of the printing machine and should be treated as capital goods, limiting Cenvat credit to 50% per financial year, as per the Cenvat Credit Rules. From March 2009 to March 2013, the appellant claimed 100% Cenvat credit.

In response to a show cause notice issued in March 2014, the assessee contended that the extended limitation period did not apply since they regularly filed returns. However, the original authority disagreed, confirmed the demand of Rs.57,56,001/- as wrongly claimed, and imposed interest and a penalty. The assessee then appealed to the tribunal.

The assessee’s counsel explained that goods under Chapters 82, 84, and 85 are treated as capital goods, but the goods in question were under Chapter 37. The assessee, believing they were not capital goods, claimed the full Cenvat credit without any intention to claim more than allowed.

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The counsel also mentioned that by the time the show cause notice was issued, the remaining 50% Cenvat credit could have been claimed and reversed. The credit taken from March 2009 to March 2013 was allowed in the next financial year, so by the time the notice came in March 2014, the full credit was admissible.

Additionally, the counsel pointed out that the assessee  had regularly filed ER-1 returns, so the demand under the extended limitation period was not valid, citing the Pahwa Chemicals vs. CCE case. It was also argued that the situation was revenue-neutral because the remaining 50% Cenvat credit would be available in the next year.

The two member bench comprising Dr.Suvendu Kumar Pati (Judicial Member) and Anil G.Shakkarwar reviewed the case and noted that the flexographic plates were considered components of the Flexo printing machine. According to Rule 2(A)(iii) of the Cenvat Credit Rules, 2004, these plates were treated as capital goods, allowing the assessee to claim 50% of the Cenvat credit in the financial year they were brought into the factory.

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The appellate tribunal found that the 50% Cenvat credit for March 2009 could have been claimed in April 2009, and similarly, the remaining 50% credit for subsequent years was eligible for claim. For the 2012-13 financial year, the remaining Cenvat credit could have been claimed in April 2013.

By the time the show cause notice was issued, the entire Cenvat credit claimed by the appellant was admissible. The CESTAT ruled that denying the credit under Rule 14, when it was already eligible, was not in line with the law.

In short,the appeal was allowed.

To Read the full text of the Order CLICK HERE

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