2007 (3) TMI 57 - AT - Central Excise

Cenvat/Modvat Appellant were cleared the good as such to other appellant at higher assessable value and accordingly department demand for reversal of credit in respect of differential value Held that recovery of credit with interest from the first appellant

Summary

Issues Involved:
1. Validity of Cenvat credit taken by M/s. Lakshmi Steel Rolling Mills.
2. Imposition of penalty on M/s. Vashist Ispat Product under Rule 13 of the Cenvat Credit Rules, 2002.
3. Legitimacy of transactions between M/s. Lakshmi Steel Rolling Mills and M/s. Vashist Ispat Product.
4. Registration and assessment practices under Central Excise Act and Rules.

Detailed Analysis:

1. Validity of Cenvat Credit Taken by M/s. Lakshmi Steel Rolling Mills:
The core issue revolved around the Cenvat credit of Rs. 45,467/- taken by M/s. Lakshmi Steel Rolling Mills. According to the Revenue, M/s. Vashist Ispat Product was required to reverse only Rs. 1,49,373/- as per Rule 3(4) of the Cenvat Credit Rules, 2002, but reversed Rs. 1,94,840/- instead. The excess credit of Rs. 45,467/- was deemed unlawful. The Tribunal upheld the recovery of this excess credit from M/s. Lakshmi Steel Rolling Mills, stating that the credit availed was beyond what was permissible under Rule 3(4).

2. Imposition of Penalty on M/s. Vashist Ispat Product:
M/s. Vashist Ispat Product was penalized Rs. 45,467/- under Rule 13 for passing on excess Cenvat credit. The Tribunal noted that although the show cause notice incorrectly cited Section 11AC, the penalty under Rule 13 was valid. However, considering the Rule 3(4) was newly enforced from 1st March 2003, and the transactions occurred within that month, the Tribunal reduced the penalty to Rs. 10,000/- due to the lack of conclusive evidence of fraud or willful misstatement.

3. Legitimacy of Transactions Between M/s. Lakshmi Steel Rolling Mills and M/s. Vashist Ispat Product:
The Tribunal examined the relationship between the two entities, revealing that both were sole-proprietory concerns of Mr. P. Vashist and Mr. Vinod Vashist. This raised questions about the genuineness of the transactions, as sole proprietors cannot transact with themselves. The Tribunal emphasized that transactions between sole proprietory concerns owned by the same individual cannot be considered independent, potentially impacting the validity of the Cenvat credit taken.

4. Registration and Assessment Practices Under Central Excise Act and Rules:
The Tribunal criticized the practice of registering sole proprietory concerns under assumed business names, which can obscure the identities of the real persons engaged in manufacturing. It highlighted that excise registrations should be in the names of the actual persons (living or juristic) as per the Central Excise Act and Rules. The Tribunal pointed out that the current practice could lead to fraud and misrepresentation, suggesting a need for regulatory reform.

Conclusion:
The Tribunal upheld the recovery of excess Cenvat credit from M/s. Lakshmi Steel Rolling Mills and reduced the penalty on M/s. Vashist Ispat Product to Rs. 10,000/-. It also called for a review of registration practices under the Central Excise Act to prevent potential fraud. The judgment emphasized adherence to the provisions of Rule 3(4) of the Cenvat Credit Rules, 2002, and the need for transparency in excise registrations.