2009 (2) TMI 528 - AT - Central Excise

Summary

Issues:
1. Availment of irregular input credit against an invoice issued in the name of another party.
2. Justification for invoking a larger period for recovery of irregular credit.
3. Validity of demanding interest and penalty under Cenvat Credit Rules.

Analysis:

Issue 1: Availment of irregular input credit
The appellant, M/s. Thangavelu Spinning Mills Ltd. (TSML), availed input credit against an invoice issued by M/s. Eraatex Agency in the name of their sister unit, M/s. Thangavelu Textile Mills Pvt. Ltd. (TTMPL). The appellant voluntarily reversed the credit upon detecting the mistake. The authorities issued a Show Cause Notice proposing to recover the irregular credit, applicable interest, and penalty under Cenvat Credit Rules, 2004. The appellant argued that the supplier issued the invoice in the sister unit's name by mistake, and they had used the inputs for manufacturing final goods. The appellant maintained that the demand was not sustainable under Section 11A of the Act, and thus, penalty imposition was unjustified.

Issue 2: Justification for invoking a larger recovery period
The authorities invoked a larger recovery period based on the alleged suppression of facts by the appellants. However, the appellants contended that they had recorded the disputed transaction details in the prescribed register and provided the same to the department. The appellants argued that the invocation of a larger period was unjustified as they had acted in good faith. The Tribunal found that the appellants were qualified to obtain credit, and the irregularity was committed by mistake. The Tribunal held that the demand, interest, and penalty were not sustainable due to the lack of substantiation by the lower authorities.

Issue 3: Validity of demanding interest and penalty
The Tribunal observed that the appellant had availed credit against an invoice issued in another party's name, which was irregular. As per Cenvat Credit Rules, penalty could be imposed for irregular credit availed. However, the Tribunal noted that the appellant had faithfully recorded the transaction details and the Revenue had not taken timely action to recover the irregular credit. Considering the circumstances, the Tribunal held that the demand, interest, and penalty were not sustainable. Consequently, the impugned order was set aside, and the appeal by M/s. Thangavelu Spinning Mills Ltd. was allowed with consequential relief, leading to the disposal of the stay application.