The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) allowed credit on invoices issued prior to 07.07.2009 and noted that the explanation to Excise Notification does not have retrospective application.
The appellant is engaged in manufacture of sugar and molasses and holding Central Excise Registration. During the course of verification of records by the Audit, and further investigations, it was noticed that the appellant has availed cenvat credit on MS angles, channels, beams which have been used for structures supporting the capital goods. The department was of the view that the credit availed on these goods received by the appellant for the period September 2008 to February 2010 is not eligible to the appellant and the same has to be reversed.
Show cause notice was issued proposing to deny the said credit and to recover the same along with interest and for imposing penalties. After due process of law, the original authority vide order impugned herein allowed the credit of Rs.35,86,474/- and denied credit to the tune of Rs.51,71,213/-. The adjudicating authority imposed equal penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 15 (2) of Cenvat Credit Rules, 2004. Aggrieved by such order, the appellant is now before the Tribunal.
It was argued by the counsel that by applying user test these goods have been used for support structure of capital goods which are integral part of the manufacturing process. The Hon’ble Jurisdictional High Court in the case of Thiru Arooran Sugars, had considered this issue as to the user test and held that the when MS structural put into use to support the capital goods, the credit availed on such MS angles / beams cannot be denied. The decision in the case of Chemplast Sanmar Ltd. Vs Commissioner, LTU, Chennai.
The Counsel asserted that as per the Annexture to the show cause notice itself, it can be seen that the entire credit is availed on invoices which are prior to 07.07.2009 except three invoices dated 17.09.2009, 02.02.2010 & 02.02.2010 for an amount of Rs.10,560/- Rs.395.20 and Rs.28,133.84 respectively. It was submitted by the counsel that all other invoices on which credit availed is prior to 07.07.2009 and the authority ought not to have denied the credit.
A Two-Member Bench comprising Vasa Seshagiri Rao, Technical Member and CS Sulekha Beevi, Judicial Member observed that “We find that as per the Annexure to the show cause notice, three invoices No.274/17.09.2009, 3009/02.02.2010 and 3100/02.02.2010, fall beyond the period of 07.07.2009. We therefore disallow the credit on these invoices. Appellant is eligible for the credit in respect of all invoices which are issued prior to 07.07.2009. After appreciating the facts and following the decisions cited supra, we are of the opinion that the appellant is eligible for credit in respect of all invoices except the three invoices mentioned above which are after 07.07.2009.”
“The decision rendered by the Larger Bench of the Tribunal in Vandana Global Ltd. has been set aside by the High Court of Chhattisgarh. Further, the Jurisdictional High Court in the case of Thiru Arooran Sugars has held that the Explanation does not have a retrospective application and also that user test has to be applied” the Bench noted.
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