2006 (11) TMI 427 - AT - Central Excise

Summary

Issues:
Challenge to disallowance of Cenvat credit by Commissioner (Appeals) - Interpretation of Rule 9A of Cenvat Credit Rules, 2002 - Admissibility of Cenvat credit on process charges - Applicability of Notification No. 35/2003 and No. 25/2003 - Calculation of Cenvat credit under Rule 9A - Obligation to declare value of stock of goods under Rule 9A - Justification for disallowance of Cenvat credit - Imposition of penalty.

Analysis:
The appellant contested the Commissioner (Appeals) order upholding the disallowance of Cenvat credit amounting to Rs. 3,48,154/- imposed by the Deputy Commissioner. The dispute centered around the irregular availing of Cenvat credit in April 2003 by the appellant, a manufacturer of M.M. Fabrics. The Revenue alleged that the appellant had declared an excessive value of goods without proper cenvatable documents, resulting in the wrongful availing of one-time credit. The lower authorities, after examining Rule 9A of the Cenvat Credit Rules, 2002, concluded that the credit on process charges included in the declared value of fabrics was not admissible.

The appellant argued that the legislative intent, as per Notification No. 35/2003 and No. 25/2003, was to include processing costs in the value of goods declared for stock. Conversely, the Department's representative contended that only the value of inputs should be considered for Cenvat credit, dismissing the relevance of process charges in this context.

Rule 9A, a transitional provision for textiles, allowed manufacturers of processed fabrics to avail credit on duty paid on inputs in stock or process as of 31-3-2003. Subsequent sub-rules detailed the calculation method for credit, especially in cases where actual duty payment documents were unavailable. The provision emphasized the consideration of average input prices for credit calculation, highlighting the necessity for a written declaration of stock description, quantity, and value by the assessee.

The Tribunal noted that the lower authorities' decision to disallow the Cenvat credit was justified based on Rule 9A's provisions. The obligation for the assessee to declare stock details did not extend to including processing charges for credit calculation, as stipulated in sub-rule 3(a) of Rule 9A. Consequently, the order requiring payment of duty amount and imposing a penalty of Rs. 10,000 was upheld, with no grounds for waiver or stay. The appellant was directed to deposit the entire payable amount within six weeks for the appeal to proceed, failing which the appeal would stand dismissed.

In conclusion, the Tribunal affirmed the decision on the disallowance of Cenvat credit, emphasizing the adherence to Rule 9A's calculation criteria and the inapplicability of processing charges in credit determination. The penalty imposition was deemed valid, with no basis for a waiver, ensuring compliance with the order's payment requirements to proceed with the appeal process.