2009 (2) TMI 619 - AT - Central Excise

Summary

Issues:
Denial of Cenvat credit due to procedural mistake in endorsement on bill of entry.

Analysis:
The case involves an appeal against the order of the Commissioner (Appeals) regarding the denial of Cenvat credit amounting to Rs. 1,52,433/- due to a procedural mistake in not obtaining necessary endorsement by Customs officers on the bill of entry for imported materials. The appellants, engaged in manufacturing cut tobacco and cigarettes for M/s. Godfrey Phillips India Ltd., received a consignment directly from the Port, took credit of duty paid, and utilized the materials in manufacturing final products. The Customs officers' endorsement was missing as per Board's Circular, leading to the reversal of the Cenvat credit. The original authority confirmed the credit reversal, imposed interest of Rs. 18,165/-, and penalty of Rs. 1,52,433/- under Rule 15 of Cenvat Credit Rules read with Section 11AC, which was upheld by the Commissioner (Appeals).

The learned advocate argued that the denial of Cenvat credit was improper as it was a procedural failure in a single instance, and the imported materials had indeed suffered duty and were utilized in manufacturing. Referring to a Tribunal decision in a similar case, the advocate contended that denial of credit and imposition of penalty were unwarranted. On the other hand, the DR supported the Commissioner (Appeals)' findings, emphasizing that the bill of entry must be in the appellant's name as per the Board's Circular for allowing Cenvat credit. The DR considered the credit irregular and highlighted that the challenge arose only when interest was demanded for the credit reversal.

After considering both sides' submissions, the Tribunal found that the procedural mistake of missing endorsement by Customs officers did not justify the denial of Cenvat credit. Citing a precedent involving a similar situation, the Tribunal emphasized that as long as the duty paid character of the imported inputs was not in doubt and they were utilized in manufacturing final products, denial of credit on technical and procedural grounds was unwarranted. The Tribunal referenced a High Court decision underscoring the need to make the scheme effective without denying beneficial provisions based on technical breaches. Consequently, the Tribunal allowed the appeal, setting aside the denial of credit and penalties, and granted consequential relief to the appellants in accordance with the law.