2009 (3) TMI 697 - AT - Central Excise

Cenvat/Modvat - Trading - Held that - whatever credit was availed by the respondent was utilized for payment of duty on the final product. As such, the credit, even if wrongly availed, stand paid back to the Revenue, when the duty was paid on the final product, which even according to the Revenue, was not required to be paid. As such, entire situation being revenue neutral, there was no justification for confirmation of demand of Modvat credit

Summary

Issues:
1. Appeal against order passed by Commissioner (Appeals) denying Cenvat credit.
2. Utilization of availed credit for payment of duty on final product.
3. Revenue neutrality and procedural lapse leading to imposition of penalty.

Analysis:
1. The appeal was filed by the Revenue against the order passed by the Commissioner (Appeals) denying Cenvat credit to the respondent. The respondent, engaged in the manufacture of M.S. barrels, had purchased barrels from other manufacturers, availed credit on them, and sold the goods to buyers after paying duty equivalent to the credit availed. The drums were not brought into the factory but were directly diverted to buyers from the manufacturer's factory.

2. The original adjudicating authority confirmed the demand of duty and imposed a penalty, which was set aside by the Commissioner (Appeals). The Commissioner held that the duty equivalent to the Cenvat credit availed had already been paid by the appellants, making the entire exercise revenue neutral. The Tribunal agreed with this finding, stating that the credit, even if wrongly availed, was utilized for paying duty on the final product. The duty paid on the final product, which was not required according to the Revenue, effectively returned the credit back to the Revenue.

3. Despite the revenue neutrality of the situation, the Tribunal noted a procedural infraction as per the Central Board of Excise and Customs' guidelines. The learned advocate for the respondent acknowledged this procedural lapse, leading to the imposition of a penalty under Rule 27 of the Central Excise Rules. The Tribunal ordered the imposition of a penalty of Rs. 5,000 due to this procedural lapse. As a result, the Revenue's appeal was allowed to the extent of imposing the penalty.

This detailed analysis of the judgment highlights the key issues involved, the Tribunal's reasoning, and the final decision regarding the denial of Cenvat credit, revenue neutrality, and the imposition of a penalty for procedural lapses.