2009 (8) TMI 993 - AT - Central Excise

Summary

Issues involved:
1. Whether the inputs not put for use in the process of manufacture disentitle the appellant to Cenvat credit of Rs. 24,862.
2. Whether the finished goods suffering duty disentitle the appellant to Cenvat credit on the inputs.
3. Penalty imposed unjustly.

First Issue:
The rejection of inputs at the pre-manufacturing stage, not attributable to the appellant, does not disentitle the appellant from Cenvat credit. Rejection at this stage is essential for quality control and does not necessarily prevent the appellant from benefiting from Cenvat credit. Even rejected and wasted inputs that have suffered duty should not lead to penalizing the appellant if the rejection was not due to their fault.

Second Issue:
The car manufactured has not evaded duty, hence the appellant should be entitled to Cenvat credit in the absence of any violation of the law. The demand of Rs. 6,90,150 on the basis of using inputs for research and development is unsustainable unless it is proven that the research did not result in finished goods escaping duty. If the research led to finished goods that have incurred duty, then Cenvat credit should be allowed.

Penalty Issue:
There is no evidence in the orders of the Authorities below to support the imposition of a penalty of Rs. 1,50,000 against the appellant. In the absence of the necessary elements as per Section 11A of the Central Excise Act, 1944, the penalty should not be imposed.

In conclusion, the rejection of inputs not used in manufacturing, the absence of duty evasion on finished goods, and the lack of grounds for penalty imposition have led to the decision in favor of the appellant. As a result, the connected appeals stemming from the same cause have become irrelevant.