2008 (3) TMI 533 - AT - Central Excise

Summary

Issues: Cenvat credit denial, penalty imposition, reconciliation statement submission, set off claim rejection, penalty under Rule 13(2) of Cenvat Credit Rules, 2002.

Cenvat Credit Denial: The judgment addressed the denial of Cenvat credit amounting to Rs. 56,822/- to the appellants due to alleged non-receipt of inputs in their factory. Shortages were identified in 13 items of inputs, with some shortages being substantial. The party's failure to explain the shortages led to the rejection of their claim for set off against excesses of other inputs. The decision to disallow Cenvat credit on the inputs found short was upheld, emphasizing that the benefit cannot be extended to inputs found short by the party themselves.

Penalty Imposition: An equal amount of penalty was imposed on the appellants, which was challenged in the appeal. The judgment highlighted that the penalty under Rule 13(2) of the Cenvat Credit Rules, 2002, was not justified in this case. The provision for penalty applied to instances involving fraud, wilful misstatement, collusion, suppression of facts, or contravention of any law with the intent to evade duty. Since none of these elements were alleged or found against the party, the penalty was set aside.

Reconciliation Statement Submission: The appellant's counsel proposed filing a reconciliation statement, but the appellants failed to submit it. The judgment noted that the absence of such a statement meant that any remand of the case, as suggested by the counsel, was unwarranted.

Set Off Claim Rejection: The party's claim for set off against shortages was not accepted, as observed by the lower authorities. The judgment reiterated that for Cenvat credit, inputs must be received and used in the manufacture of final products in the factory, and this benefit cannot be extended to inputs found short by the party themselves.

Conclusion: The appeal was partly allowed, with the decision to disallow Cenvat credit on the inputs found short being upheld, while the penalty imposed under Rule 13(2) of the Cenvat Credit Rules, 2002, was set aside. The judgment emphasized the importance of compliance with Cenvat credit rules and the necessity of substantiating claims and explanations regarding shortages and set off against excesses.