Commissioner Of Customs, Central Excise And Service Tax, Durgapur vs. M/S. Philips Carbon Black Limited And Anr.

Facts

The Commissioner of Customs, Central Excise and Service Tax, Durgapur (appellant/revenue) filed an appeal against an order dated December 17, 2019, passed by the Customs, Excise and Service Tax Tribunal, East Zonal Bench, Kolkata. The appeal was filed with a delay of 384 days, for which the revenue sought condonation. The core of the dispute involves the availment of Cenvat credit by M/s. Philips Carbon Black Limited and another (respondent/assessee). The revenue's appeal challenges the Tribunal's decision to allow the assessee's appeal and set aside the adjudication order. The amount in dispute is not explicitly stated in the provided text.

Held

The Court held that the Tribunal rightly allowed the appeal filed by the assessee and set aside the order of adjudication. The Court dismissed the appeal filed by the revenue and answered the substantial questions of law against the revenue. The reasoning was largely based on previous judgments, particularly the case of Principal Commissioner of CGST & Central Excise, Howrah –versus- M/s. Himadri Speciality Chemical Private Limited, which the revenue had accepted. The Court reiterated that if an assessee fails to follow the procedure under Rule 6(3) of the Cenvat Credit Rules, the authorities cannot choose an option on behalf of the assessee; instead, they can reject the claim or recover the wrongly availed credit under Rule 14. Furthermore, the Court referenced the decision in Gularia Chini Mills Versus Union of India, affirmed by the Supreme Court, which established that Rule 6 of the Cenvat Credit Rules, 2004, is applicable only when a manufacturer produces both dutiable and exempted goods. The Court noted that electrical energy generated from bagasse is not excisable goods, and therefore, Rule 6 is not applicable. The stay application was also dismissed.

Key Issues

1. Whether the Learned Tribunal erred in not holding that availing credit by the Respondent cannot be a substantive right since the availment of such credit is subject to compliance with procedural requirements? (This question turns on the interpretation of procedural rules governing Cenvat credit availment). 2. Whether the Learned Tribunal erred in law by holding that Rule 6(1) of the Credit Rules is clearly not aimed at revenue maximization but credit neutralization, and Rules 6(2) and 6(3) of the said Rules are aimed at securing compliance with the substantive provision contained in Rule 6(1) of the said Rules? (This question concerns the interpretation and application of specific Cenvat Credit Rules). Arguments for the Petitioner (Revenue): The revenue contended that availing Cenvat credit is not an absolute right but is contingent upon adherence to procedural requirements. They argued that the Tribunal erred in its interpretation of Rules 6(1), 6(2), and 6(3) of the Cenvat Credit Rules, suggesting these rules are aimed at revenue maximization and compliance. Arguments for the Respondent (Assessee): The respondent relied on previous judgments, including Principal Commissioner of CGST & Central Excise, Howrah –versus- M/s. Himadri Speciality Chemical Private Limited and Tiara Advertising Versus Union of India, to support their claim. They argued that the statutory scheme does not empower Service Tax authorities to choose options on behalf of the service provider if procedural requirements under Rule 6(3) are not followed, and that recovery of wrongly availed credit is provided for under Rule 14. They also cited Gularia Chini Mills Versus Union of India, affirmed by the Supreme Court, to argue that Rule 6 is not applicable if the goods are not excisable or are waste products.