Removal of inputs/capital goods as such - when to pay the amount of CENVAT Credit?
WHEN the inputs/capital goods are removed as such, an amount equal to the credit availed, has to be paid back. When is this amount to be paid? Is it on the date of removal of inputs/capital goods or like other duty payments, by the 5th of the following month?
Is it a big issue? You may not think so, but Commissioners take these issues seriously and some Commissioners have taken the issue to the CESTAT. Let us see some cases.
1. CCE, Raigad v Savita Polymers - 2006-TIOL-1463-CESTAT-MUM : In this case, the Commissioner took the matter in appeal to the CESTAT on the ground that the assessee had availed CENVAT credit on inputs/capital goods and cleared the said inputs/capital goods as such and had not paid the duty at the time of removal as required but debited the duty on monthly basis i.e on 5 th of the following months from April 2002 to March, 2002 which has resulted in delay of payment of duty and loss of interest to the extent of Rs. 24,189 /-. The Tribunal rejected the Revenue appeal, but imagine the amount of time and money wasted.
2. CCE, Mumbai III v Paper Products - : This was a similar case in which following the Savita Polymers decision, the Tribunal dismissed the Revenue appeal.
3. CCE, Raigad v Cadila Healthcare - : In this case also, following Savita , the Revenue appeal was rejected.
4. Apar Industries v CCE, Mumbai - 2008-TIOL-87-CESTAT-MUM : In this case, the Adjudicating Authority held that facility of fortnightly payment is not for the input/capital goods cleared as such and is only for the payment of duty on the finished goods. On these findings, he confirmed the demand of interest and imposed penalty. Based on the above rulings, CESTAT dismissed the Revenue appeal in this case also.
The height of Revenue ridicule could be seen in KLRF Textiles v CCE, Tirunelveli - : In this case, the Adjudicating Authority imposed equal penalty under Section 11AC, which was reduced by the Commissioner(A). The Commissioner was aggrieved with the order of the Commissioner (A) reducing the penalty and appealed to the Tribunal for a princely amount of Rs. 1,32,356/-. The Tribunal held that no penalty was liable to be imposed.
Now, after all these years, the Government has amended the Rules to stipulate that the amount can be paid by the 5th of the following month.
Actually, rule 8 of the CER, 2002 [Manner of payment] was amended by notification 8/2007-CE(NT) dated 01/03/2007 and the following explanation was added to cater to such "amount payments" under CCR, 2004. It reads -
"Explanation.- For the purposes of this rule, the expressions 'duty' or 'duty of excise' shall also include the amount payable in terms of the CENVAT Credit Rules, 2004.".
Probably, this too fell short in addressing the specific issues concerning rule 3 of the CCR, 2004 and so an explicit "Explanation 1" has been now added in this rule.