2004 (3) TMI 596 - AT - Central Excise

Summary

Issues Involved:
1. Denial of CENVAT credit of Rs. 46,600/-
2. Disallowance of CENVAT credit of Rs. 51,811/ taken before factory registration
3. Disallowance of CENVAT credit of Rs. 30,05,054/- for inputs stored outside factory premises
4. Imposition of penalty

Issue 1: Denial of CENVAT credit of Rs. 46,600/-
The appellant took the credit on inputs in March 2001, which was utilized in April 2001. The denial was based on the inputs not being in the registered factory premises. The relevant rule, Rule 57AB(1), requires inputs to be received in the factory after a specified date, which was not disputed. As the inputs were duty-paid and used in final product manufacture, the denial lacked justification, especially when no other grounds were raised initially.

Issue 2: Disallowance of CENVAT credit of Rs. 51,811/-
This credit was taken before factory registration, and the lower appellate authority rightly disallowed it as the factory was not under Central Excise control at that time. The appellant did not challenge this decision, hence the denial of this credit was appropriate.

Issue 3: Disallowance of CENVAT credit of Rs. 30,05,054/- for inputs stored outside factory premises
The appellant availed this credit without obtaining prior permission as required by CBEC Circular No. 206/40/96/CX. 8. The circular specified that permission was necessary for storing inputs outside the factory, which was not done by the appellant. Despite an undertaking to follow the circular's procedure, the appellant failed to comply throughout the relevant period. The Tribunal found the original authority's decision correct, and the lower appellate authority erred in allowing the credit after acknowledging the breach of law and procedure.

Penalty Imposition:
The Tribunal acknowledged the fair reduction of penalty to Rs. 50,000 by the lower appellate authority, finding no reason to interfere with this decision.

Conclusion:
The Tribunal upheld the denial of CENVAT credit of Rs. 51,811/- and the penalty of Rs. 50,000, while setting aside the decision regarding the credits of Rs. 46,600/- and Rs. 30,05,054/-. The appellant's appeal was partly allowed, and the Revenue's appeal was allowed concerning the credit of Rs. 30,05,054/-.