Gauhati High Court
Premier Cryogenics Limited vs The Commissioner Central Excise And ... on 12 June, 2024
Author: Suman Shyam
Bench: Chief Justice, Suman Shyam
Page No.# 1/13
GAHC010248452018
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : C.Ex.App./84/2018
PREMIER CRYOGENICS LIMITED
A PUBLIC LTD. COMPANY FORMED UNDER THE PROVISIONS OF INDIAN
COMPANIES ACT HAVING IT'S MANUFACTURING UNIT AT SAUKUCHI,
LOKHRA ROAD, GUWAHATI-782034, KAMRUP (M), ASSAM AND
REPRESENTED BY ITS MANAGING DIRECTOR MR. ABHIJIT BAROOAH 46
YEARS
VERSUS
THE COMMISSIONER CENTRAL EXCISE AND SERVICE TAX
CENTRAL EXCISE AND SERVICE TAX, GUWAHATI DIVISION, G.S. ROAD,
GUWAHATI 781005
Advocate for the Petitioner : MR. D SARAF
Advocate for the Respondent : Mr. S. C. Keyal, SC, Central Excise.
BEFORE
HONOURABLE THE CHIEF JUSTICE
HONOURABLE MR. JUSTICE SUMAN SHYAM
Date of hearing : 04.06.2024
Date of judgment : 12.06.2024
Page No.# 2/13
JUDGMENT & ORDER (CAV)
(Suman Shyam,J)
Heard Mr. D. Saraf, learned counsel appearing for the appellant. Also heard
Mr. S. C. Keyal, learned counsel representing the respondent.
2. This appeal has been preferred by the assessee (M/S Premier Cryogenics
Limited) assailing the order dated 02.05.2018 passed by the learned Central Excise
and Service Tax Appellate Tribunal (CESTAT), Kolkata in Excise Appeal No.E/75264/15,
partly allowing the appeal filed by the assessee against the order dated 25.11.2014
passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals),
Guwahati.
3. The facts of the case, in a nutshell, are that the appellant herein is engaged in
the business of manufacture of oxygen/nitrogen and is registered under the Central
Excise Department vide Registration No.AABCP6683NXM001 and Service Tax
Registration No.AABCP6683NXM001 having its manufacturing unit at Saukuchi, Lokhra
Road, Guwahati, Assam. The manufacturing unit of the appellant commenced its
commercial production on 26.03.2004. Under the Notification No.32/99-CE dated
08.07.1999 issued by the Central Government, the appellant was entitled to
exemption on the credit of CENVAT including exemption on capital expenditure. As
per the projection made in this appeal, the appellant had procured capital goods
from M/S INOX Air Products Ltd. for use in the factory during the year 2007-08.
However, the plants and machineries so procured during the year 2007-08 were not
installed/put to use in the factory until the year 2011. The assessee had availed
Page No.# 3/13
CENVAT credit amounting to a sum of Rs.22,93,920/- during the financial year 2010-11
and 2011-12 on capital goods received during the months of November, 2007,
December, 2007 and January, 2008. According to the Revenue, CENVAT credit
amounting to Rs.22,93,920/- against capital goods was available to the assessee only
during the financial years 2007-08 and 2008-09 in terms of Rule 4(2) of the Cenvat
Credit Rules. Therefore, the assessee could have utilized the Cenvat Credit upto 50%
towards payment of Central excise duty only in those financial years and the
balance 50% could have been used in the subsequent financial years.
4. Although the assessee had claimed that these facts were within the
knowledge of the jurisdictional authorities, yet, according to the Revenue, the fact
that the machineries were procured in 2007 and 2008 were not disclosed by the
assessee. It was only during an audit inspection that these facts come to light. As
such, vide Show Cause notice dated 18.12.2012 the assesee was asked to show
cause as to why the erroneous refund of excise duty amounting to Rs.15,95,332/-
sanctioned during the period from November 2007 to January, 2008 as well as the
wrongful availment of CENVAT credit amounting to Rs.22,93,920/- during the financial
years 2010-11 and 2011-12 should not be recovered from the assessee.
5. Based on the proceedings initiated on the basis of the aforementioned show
cause notice, the Additional Commissioner of Central Excise and Service Tax,
Guwahati had passed Order -in-Original No.39/Addl.Commr/BT/CE/ GHY/12-13
dated 29.05.2013 whereby, it was held that the amount demanded by the Revenue
was not recoverable from the assessee under the law. Aggrieved by the order dated
Page No.# 4/13
29.05.2013, the Revenue went in appeal before the Commissioner (Appeals) Customs,
Central Excise & Service Tax (NER), Guwahati. By the order dated 25.11.2014, the
Commissioner (Appeals) Customs, Central Excise & Service Tax (NER) had interfered
with the Order-in-Original dated 29.05.2013, thus allowing the appeal filed by the
Revenue. The operative part of the order dated 25.11.2014 is reproduced herein
below for ready reference :-
"12. I have gone through the records of the case and submissions made in
the appeal. The issue to be decided in this case is that whether the appellants
can take/utilize Cenvat credit during the month subsequent to the months in
which these were available when the appellants are availing exemption under
the notification No.32/99-CE dated 8/7//99. To examine the issue it is relevant
to mention the condition as envisaged in para 2B of the notification No.32/99-
CE dated 8/7//99.
"2B. In cases where all the gods produced by a manufacturer are
eligible for exemption under this notification, the exemption contained in
this notification shall be subject to the condition that the manufacturer
first utilizes whole of the Cenvat Credit available to him in the last date of
the month under consideration for payment of duty on goods cleared
during such month and pays only the balance amount in cash."
13. I find that para 2B of the said notification is a substantive condition and
the appellant has violated the said condition rendering them non-entitlement
of the benefit of the said notification. I also find that CBEC vide letter
F.No.101/04/2003-CX.3 dated 04/06/2009 has clarified that when the
manufacturer has not availed credit and consequently paid higher amount in
cash, the amount of the said non-availed credit is to be deducted from the
amount to be paid as refund, instead of rejecting the entire refund claim.
14. I find that the capital goods were received by the respondent assessee
Page No.# 5/13
in the year 2007-08 and 2008-09 and these were stated to have been
installed/used in the factory in the year 2010-11 and the appellant was availing
area based exemption in terms of notification No.32/99-CE dated 8/7//99. The
Board's Circular referred above clarified the manner in which the credit is to be
availed/utilized while availing exemption under the said notification. As regards
the suppression of facts etc. I find that the case was detected in course of
departmental audit. Had there been no audit the matter would have
remained suppressed. Therefore, invocation of extended period is found
justified.
15. The case laws cited by the appellant are misplaced because the fact of
those cases are not similar to that of appellant's case in as much as it is not the
case of denial of Cenvat Credit but on the contrary the case arose only
because of non availment and consequently non-utilisation of Cenvat credit
which was available to the appellant.
16. Hence Cenvat credit which were not availed and utilized on the last day
of the month in which it was available but utilized in subsequent months and
consequently paid higher amount in cash, the amount of the said non-availed
credit is to be deducted from the amount to be paid as refund.
17. I find that the adjudicating authority has erred in not confirming the
demand being the amount of credit not availed and utilized in the last day of
the month in which credit was available.
18. In view of the above the appeal filed by the department is allowed."
6. Assailing the order dated 25.11.2014 the assessee i.e. the appellant herein had
preferred Excise Appeal No.E/75264/15 before the Central Excise and Service Tax
Appellate Tribunal (CESTAT), Kolkata, which was disposed of by the impugned
judgment and order dated 02.05.2018. The operative part of the order dated
02.05.2018 is reproduced herein below for ready reference :-
Page No.# 6/13
"6. The claim of the appellant that these facts were known to the
jurisdictional authority does not impress; the refund claim did not contain any
declaration of procurement of capital goods without availment of CENVAT
credit. As far as the subsequent availment CENVAT credit is concerned, without
a finding of ineligibility for the amount claimed and in view of recovery of
refund that was in excess of such deferred credit, we hold that the entitlement
to CENVAT credit is not deniable. Recovery of that amount is not correct in law.
Accordingly, the appeal of M/S Premier Cryogenics Ltd. is allowed to the
extent of setting aside the demand of Rs.22,93,920/- while upholding the
recovery of Rs.15,95,332/-."
7. It appears from the case records that being partly aggrieved with the order
dated 02.05.2018 the Revenue had preferred C. Ex. Appeal No.2/2020 before this
Court. However, the said appeal was subsequently closed on account of the fact
that the sum of Rs.22,93,920/- involved in the appeal was below the pecuniary limit of
Rs.1,00,00,000/- (Rupees One Crore) fixed by the Ministry of Finance for the High Court
to entertain an appeal of this nature. As such, only the appeal preferred by the
assessee against the impugned order dated 02.05.2018 survived for consideration by
this Court.
8. Assailing the impugned order dated 02.05.2018, in so far as the same upholds
the demand for recovery of a sum of Rs.15,95,332/- being the CENVAT credit availed
by the appellant on the capital goods procured in the years 2007-08 and 2008-09 is
concerned, Mr. Saraf has argued that even though the capital goods were procured
in the years 2007-08 and 2008-09 but the machineries so procured were not
installed/put to use in the factory until the year 2011. Therefore, the CENVAT credit
was claimed by the appellant only in the year 2011 upon installation of the
Page No.# 7/13
machineries. Contending that there is no provision either in the CENVAT Credit Rules,
2004 or the Central Excise Notification dated 08.07.1999 laying down that the CENVAT
credit would have to be availed only in the year of procurement, failing which, such
claim would be barred in the subsequent years, Mr. Saraf has argued that the
reliance placed on the definition of "Capital Goods" in Rule 2(a) of the CENVAT
Credit Rules, 2004 to deny the claim of the appellant is wholly erroneous in the facts
and circumstances of the present case.
9. By referring to a decision of the Supreme Court in the case of Madras Cements
Ltd. vs. Commissioner of Central Excise reported in 2010 (6) SCC 606 Mr. Saraf has
further argued that in order to avail CENVAT credit over capital goods, the only thing
that the assessee would be required to satisfy is that the capital goods were utilized
for manufacturing during the period of validity of the exemption notification.
10. By referring to another decision of the Supreme Court rendered in the case of
KCP Ltd. vs. Commissioner of Central Excise, Chennai reported in 2014 (1) SCC 597 Mr.
Saraf has argued that unless the capital goods are installed in the factory it would be
wholly impermissible for his client to claim CENVAT credit on such capital goods for
the year 2007-08. On such grounds the learned counsel for the appellant has prayed
for setting aside the impugned judgment and order dated 02.05.2018, in so far as the
same relates to upholding the demand of recovery of Rs.15,95,332/- from the
appellant, is concerned.
11. Responding to the above argument, Mr. S. C. Keyal, learned counsel for the
respondent has submitted that the provisions of the Cenvat Credit Rules, 2004 more
Page No.# 8/13
particularly, Rule 2(a), makes it clear that the capital goods would have to be used in
the factory for availing CENVAT credit. According to Mr. Keyal, the assessee would be
entitled to claim CENVAT credit to the extent of 50% of the amount at the end of the
same financial year but it cannot carry forward its entire claim beyond the year of
procurement. To that extent, he submits, CENVAT credit availed by the appellant on
account of capital goods was illegal and therefore, the learned Tribunal has rightly
permitted recovery of the same.
12. We have considered the arguments made at the Bar and have also gone
through the materials available on record.
13. The learned counsel for the both parties have placed heavy reliance on the
provisions of Rule 2 as well as Rule 4 of the Cenvat Credit Rules, 2004 so as to
substantiate their respective arguments. Rule 2(a) of the Cenvat Credit Rules, 2004
defines "capital goods" which reads as follows :-
"RULE 2. Definitions. -- In these rules, unless the context otherwise requires, - (a)
―capital goods‖ means :-
(A) the following goods, namely :-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter
90, [heading 6805, grinding wheels and the like, and parts thereof falling
under [heading 6804 and wagons of sub-heading 860692]] of the First
Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i)
and (ii);
(iv) moulds and dies, jigs and fixtures;
Page No.# 9/13
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; [* * * ]
(vii) storage tank, [and]
[(viii) motor vehicles other than those falling under tariff headings 8702,
8703, 8704, 8711 and their chassis [but including dumpers and tippers],]
used - "
14. Rule 4 of the Rules of 2004 deals with the conditions for allowing CENVAT credit.
Rule 4 is extracted herein below for ready reference :-
"RULE 4. Conditions for allowing CENVAT credit. -- (1) 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:
[Provided that in respect of final products, namely, articles of [jewellery
or other articles of precious metals falling under Heading 7113 or 7114, as the
case may be] of the First Schedule to the Excise Tariff Act, the CENVAT credit of
duty paid on inputs may be taken immediately on receipt of such inputs in the
registered premises of the person who get such final products manufactured
on his behalf, on job work basis, subject to the condition that the inputs are
used in the manufacture of such final product by the job worker :]
[Provided further that the CENVAT credit in respect of inputs may be
taken by the provider of output service when the inputs are delivered to such
provider, subject to maintenance of documentary evidence of delivery and
location of the inputs :]
[Provided also that the manufacturer or the provider of output service
shall not take CENVAT credit after [one year] of the date of issue of any of the
documents specified in sub-rule (1) of rule 9.]
(2)(a) The CENVAT credit in respect of capital goods received in a
factory or in the premises of the provider of output service [or outside the
Page No.# 10/13
factory of the manufacturer of the final products for generation of electricity
for captive use within the factory,] at any point of time in a given financial year
shall be taken only for an amount not exceeding fifty per cent. of the duty paid
on such capital goods in the same financial year :
Provided that the CENVAT credit in respect of capital goods shall be
allowed for the whole amount of the duty paid on such capital goods in the
same financial year if such capital goods are cleared as such in the same
financial year :
[Provided further that the CENVAT credit of the additional duty leviable
under sub-section (5) of section 3 of the Customs Tariff Act, [ * * * *] in respect of
capital goods shall be allowed immediately on receipt of the capital goods in
the factory of a manufacturer :]
[Provided also that where an assessee is eligible to avail of the
exemption under a notification based on the value of clearances in a financial
year, the CENVAT credit in respect of capital goods received by such assessee
shall be allowed for the whole amount of the duty paid on such capital goods
in the same financial year :
[Provided also that the CENVAT credit in respect of capital goods may
be taken by the provider of output service when the capital goods are
delivered to such provider, subject to maintenance of documentary evidence
of delivery and location of the capital goods.]
[Explanation. - For the removal of doubts, it is hereby clarified that an
assessee shall be "eligible" if his aggregate value of clearances of all excisable
goods for home consumption in the preceding financial year, computed in the
manner specified in the said notification, did not exceed rupees four hundred
lakhs.]
(b) The balance of CENVAT credit may be taken in any financial year
subsequent to the financial year in which the capital goods were received in
the factory of the manufacturer, or in the premises of the provider of output
Page No.# 11/13
service, if the capital goods, other than components, spares and accessories,
refractories and refractory materials, moulds and dies and goods falling under
[heading 6805, grinding wheels and the like, and parts thereof falling under
heading 6804] of the First Schedule to the Excise Tariff Act, are in the possession
of the manufacturer of final products, or provider of output service in such
subsequent years."
15. A conjoint reading of the provisions of Rule 2(a) and Rule 4 of the Rules of 2004
go to show that while Rule 2(a) lays down the definition of "capital goods", the
conditions for providing CENVAT credit under the Rules are laid down under Rule 4. A
plain reading of Rule (2)(b) of Rule 4 shows that balance of CENVAT credit may be
availed in any financial year subsequent to the financial year in which the capital
goods were received in the factory of the manufacturer. Rule (2)(a) of Rule 4 of the
Rules of 2004 provides that CENVAT credit in respect of capital goods received in a
factory or in the premises of the provider at any point of time in a given financial year
shall be taken only for an amount not exceeding 50% of the duty paid on such
capital goods in the same financial year. However, neither Rule 4 nor Clause 2B
contained in the Notification dated 08.07.1999 creates any embargo in claiming
CENVAT credit with regard to capital goods in any subsequent financial year,
provided the same has been installed in the factory in such subsequent years. The
only requirement under the Rules and the notification appears to be that there must
be actual installation and use of the capital goods in the factory for availing CENVAT
Credit. Our attention also could not be drawn to any provision of the Rules or the
relevant notification which makes it mandatory for the assessee to install all capital
goods in the year of procurement itself so as to avail CENVAT credit.
Page No.# 12/13
16. It is no doubt correct that as per Rule 2(a) of the Rules of 2004 it would be
open for the assessee to avail upto 50% of CENVAT credit in the financial year when
the capital goods were procured. However, as noted above, Rule 2(a) of the Rules
does not make it mandatory for the assessee to lodge a claim for Cenvat Credit only
in the year of procurement of the machinery. On the contrary, what it does is that a
ceiling of 50% of Cenvat Credit has been imposed in the year of procurement of the
Capital Goods. Rule 2(a) does not also debar the assessee from claiming CENVAT
credit during the financial years when the capital goods were actually installed in the
factory. As long as the CENVAT credit is availed during the period of exemption
available under the Notification dated 08.07.1999, the claim of the assessee, in our
view, would not stand extinguished merely because the Cenvat Credit claim was not
lodged nor availed during the financial years when the capital goods were procured.
As such, we are of the considered opinion that in the facts and circumstances of the
present case, there is no cogent basis for this Court to conclude that the assessee
had illegally availed CENVAT credit for procurement of the capital goods pertaining
to the years 2010-11 and 2011-12. Consequently, the order for recovery of the amount
of CENVAT credit as affirmed by the learned Tribunal is held to be unsustainable in the
eyes of law.
17. For the reasons stated herein above, we are of the unhesitant opinion that the
Commissioner (Appeals), Customs, Central Excise and Service Tax, Guwahati, was not
correct in passing the order dated 25/11/2014 particularly in so far as allowing the
demand for recovery of Rs. 15,95,332/- as CENVAT credit availed by the appellant on
the capital goods is concerned. Consequently, the judgment and order dated
Page No.# 13/13
02/05/2018 passed by the CESTAT to the extent of allowing the above recovery, is also
held to be unsustainable in law. As such, the impugned judgment and order dated
02/05/2018 is hereby set aside.
18. The appeal is allowed accordingly.
Parties to bear their own cost.
JUDGE CHIEF JUSTICE
T U Choudhury/ Sr.PS
Comparing Assistant
