2009 (6) TMI 870 - Commissioner - Central Excise

Summary

Issues Involved:
1. Denial of Cenvat credit on inputs sent directly to job worker's premises.
2. Allegation of suppression of facts and invocation of the extended period.
3. Imposition of penalty and interest despite payment of disputed credit before the issue of SCN.

Detailed Analysis:

1. Denial of Cenvat credit on inputs sent directly to job worker's premises:

The appellant, engaged in the manufacture of castings, availed Cenvat credit on inputs directly sent to job worker's premises without bringing them to their factory. The lower authority denied the credit on the grounds that the inputs were not received in the appellant's factory and the finished products were not brought back before export. The appellant contended that this procedure was permitted by Board's Circular No. 33/33/94-CX8, dated 4-5-1994, and followed the procedures set out therein. Various appellate forums, including the Tribunal in cases like R.D. Electronics Pvt. Ltd. v. CCE, Delhi, have upheld that Cenvat credit is not deniable for inputs sent directly to job workers if procedural compliance is maintained. The judgment confirmed that the receipt of inputs at the job worker's premises and their use in manufacturing excisable goods were not disputed, thus justifying the appellant's claim to Cenvat credit.

2. Allegation of suppression of facts and invocation of the extended period:

The lower authority invoked the extended period alleging that the appellant suppressed the fact of sending inputs directly to job workers and exporting the finished products from there. The appellant argued that the Board's circular did not mandate informing the department about this procedure. The judgment found this to be a 'technical violation' and emphasized that substantial benefits should not be denied due to technicalities, especially when the conditions for availing credit were fulfilled. The appellant had permissions from the jurisdictional Commissioner for clearances from the job worker's premises, covering the relevant periods.

3. Imposition of penalty and interest despite payment of disputed credit before the issue of SCN:

The appellant paid the disputed credit amount before the issuance of the Show Cause Notice (SCN). The lower authority imposed an equal penalty and interest, which the appellant contested, citing precedents like Rashtriya Ispat Nigam Ltd. v. CCE, Visakhapatnam, where penalties were not imposed when the disputed amount was paid before the SCN. The judgment supported the appellant's stance, noting that the activities were transparent and there was no suppression of facts. Therefore, the imposition of penalty and interest was deemed unjustified.

Conclusion:

The judgment allowed the appeal, setting aside the impugned order-in-original (OIO) passed by the Joint Commissioner, Central Excise, Pune-II. The appellant was entitled to Cenvat credit on inputs sent directly to job workers' premises, and the denial of credit on procedural grounds was not sustainable. The imposition of penalty and interest was also unwarranted, given the payment of disputed credit before the SCN and the appellant's compliance with procedural requirements.