2006 (2) TMI 553 - AT - Central Excise

Summary

Issues:
1. Disallowance of Cenvat credit in respect of Plastic Crates and Glass Bottles.
2. Interpretation of Board's Circular regarding eligibility for Cenvat credit.
3. Allegation of intention to avail ineligible credit.
4. Legal and proper application of the Board's Circular by the Commissioner.
5. Applicability of previous judgments in similar cases.

Issue 1: Disallowance of Cenvat credit
The Revenue challenged the Order-in-Appeal (OIA) allowing Cenvat credit for Plastic Crates and Glass Bottles as of 1-4-2000. The Commissioner upheld the claim based on the Board's Circular, emphasizing that failure to avail credit on inputs received before 31-3-2000 does not negate eligibility. The Commissioner noted that denial of credit in deserving cases contradicts the Cenvat scheme's spirit. Despite procedural lapses by the appellant, the Commissioner set aside the disallowance of Cenvat credit and interest collection due to the absence of malafides.

Issue 2: Interpretation of Board's Circular
The primary issue revolved around the interpretation of the Board's Circular regarding the eligibility of Cenvat credit. The Circular clarified that manufacturers could claim credit for inputs received before 31-3-2000, even if not availed due to certain reasons. The Commissioner found the Circular relevant and binding, emphasizing that manufacturers could earn credit even if not taken initially. The appellant's entitlement to credit was affirmed, and any disallowance would burden the manufacturer against the Cenvat scheme's intent.

Issue 3: Allegation of intention to avail ineligible credit
The crux of the matter was whether there was an intention to avail ineligible credit. The appellant's eligibility for credit was not in dispute, and there was no evidence of irregular credit availing. Despite procedural deviations, the absence of malafides led to the conclusion that disallowance of Cenvat credit and interest collection was unwarranted. The Commissioner emphasized that procedural lapses should not deny the substantial benefit of credit, especially without malicious intent.

Issue 4: Legal and proper application of the Board's Circular
The Revenue contended that the Commissioner's order was not legal and proper, arguing that credit must be earned before 1-4-2000. However, the Tribunal upheld the Commissioner's decision, stating that she was bound by the Board's Circular, which carries a binding effect as per relevant judgments. The Tribunal deemed the order legal and proper, rejecting the Revenue's appeal due to the Commissioner's correct application of the Circular.

Issue 5: Applicability of previous judgments
Both parties referenced previous judgments to support their arguments. The appellant relied on the Apex Court's ruling in a specific case to assert the binding nature of the Board's Circular. Conversely, the Revenue cited a judgment from the Eastern Regional Bench to challenge the Circular's applicability. Ultimately, the Tribunal upheld the Commissioner's decision, emphasizing the binding effect of the Circular and rejecting the Revenue's appeal based on the legal and proper application of the Circular.