2009 (9) TMI 844 - AT - Central Excise

Summary

Issues involved: Appeal against confirmation of interest and penalty on Cenvat credit reversal for cancelled stocks and flood damaged goods.

Summary:

Issue 1: Cenvat credit reversal on cancelled stocks and flood damaged goods
The appellants availed Cenvat credit on inputs used in manufacturing excisable products, cleared without duty payment. Audit raised objections regarding reversal of Cenvat credit on cancelled stocks and flood damaged goods. Show cause notice proposed denial of Cenvat credit and imposition of penalty u/s 11AC of Central Excise Act, 1944.

Issue 2: Confirmation of interest and penalty
Assistant Commissioner confirmed show cause notice, citing non-payment of interest on reversed Cenvat credit as deliberate evasion of revenue. Commissioner (Appeals) upheld the decision, stating delay in credit reversal warranted interest and penalty.

Appellant's Arguments:
1. Reversal of Cenvat credit was to avoid litigation, not a legal requirement.
2. No duty payment obligation or grounds for invoking penal provisions.
3. Reversal not needed for stocks within factory premises, as per Cenvat Credit Rules.
4. Notification introducing credit reversal provision not retrospective.

Case Laws Relied Upon:
- Bharat Heavy Electricals Ltd.: Credit not deniable on written off inputs in factory.
- Audco India Ltd.: Credit valid on unutilized inputs within factory.
- Tecumseh Products India Pvt. Ltd.: No liability to reverse credit on written off items in factory.

Respondent's Argument:
Stores written off not considered inputs u/s 2A of Cenvat Credit Rules, requiring credit reversal. Appellants evaded duty by using credit without duty payment.

Decision:
After considering arguments and case laws, the Tribunal found in favor of the appellant, setting aside the impugned order and allowing the appeal. Notification introducing credit reversal provision was not retrospective, and the appellant's case aligned with established precedents.

*(Pronounced in Court on 11-9-2009)*