CESTAT Chandigarh Allows CENVAT Credit On Inputs From Exempt Units, Grants Relief To Reckitt Benckiser

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, has ruled that consumer goods maker Reckitt Benckiser India Ltd. was entitled to claim CENVAT credit on duty-paid raw materials purchased from certain tax-exempt manufacturers.

It held that the benefit could not be denied simply because the law was amended later to expressly allow it.

"We find that before the amendment there was no express prohibition in the CENVAT Credit Rules so as to deny such credit availed by the appellant. Since the appellant has satisfied the conditions of the CCR, credit cannot be denied for the reason that express provision for the same came at a later date," the tribunal observed.

A bench of Judicial Member S.S. Garg and Technical Member P. Anjani Kumar also ruled that the tax department could not invoke the extended limitation period. It observed that the dispute involved the interpretation of the law and that there was no evidence the company had intended to evade duty.

The dispute arose after the company claimed CENVAT credit on duty-paid inputs purchased from manufacturers enjoying a central excise exemption. The tax department argued that such credit was unavailable during the relevant period because the law expressly permitting it came into force only later.

A show cause notice sought recovery of ₹79.49 lakh in allegedly inadmissible CENVAT credit, along with interest and penalty. The demand was confirmed by the adjudicating authority and later upheld by the Commissioner (Appeals), prompting the company to approach the tribunal.

Before the tribunal, the company argued that it had fulfilled all the conditions required to claim CENVAT credit and that nothing in the rules barred it from availing the benefit. It also submitted that the later amendment merely clarified the existing legal position.

The Revenue, however, maintained that there was no provision permitting such credit before the amendment and defended the invocation of the extended limitation period.

The tribunal disagreed. It observed that the CENVAT credit scheme had to be read as a whole and that the Department did not dispute that the statutory conditions for availing credit had been satisfied. It also found no evidence that the company had suppressed facts with an intent to evade duty. Holding the company's favour on both merits and limitations, the tribunal allowed the appeal.

For Appellant: Advocates Krati Singh and Khushi Satviki,

For Revenue: Maheswar Maji and Amita Gupta, Authorized Representatives