2009 (10) TMI 761 - AT - Central Excise

Summary

Issues:
Denial of Cenvat credit under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A(2) of the Central Excise Act due to suppression of facts.

Detailed Analysis:

Issue 1: Denial of Cenvat credit under Rule 14 of Cenvat Credit Rules, 2004
The appeal filed by M/s. Kirloskar Brothers challenges the denial of Cenvat credit amounting to Rs. 8,44,292 under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A(2) of the Central Excise Act. The dispute arose from the company's practice of maintaining separate RG 23A Part II registers for job work transactions and regular Cenvat credits. The company faced allegations of suppression of facts related to the unutilized credit balance of Rs. 8,44,292 in the job work-related register. The lower authorities confirmed the demand for duty, interest, and penalty, which was partially upheld in the appeal. The appellant argued that the documents requested were old, hindering their ability to produce all records. However, the available documents were deemed sufficient to establish a link between transactions from September 1996 to January 2006.

Issue 2: Allegations of Suppression of Facts
The appellant contended that the procedure adopted for transferring credit between accounts within the same factory premises was permissible for accounting and administrative purposes only. The appellant's counsel argued that the show-cause notice was time-barred and lacked evidence of intent to evade duty payment. On the contrary, the respondent asserted that the unutilized credit amount was not disclosed in returns until January 2006, indicating non-disclosure to the department. The lack of coordination between the General Stores section and the Excise section led to discrepancies in maintaining Cenvat credit records. The respondent highlighted the absence of challans evidencing the movement of processed inputs post-31-3-2000, creating a gap in establishing the correlation between credit transactions.

Issue 3: Transfer of Unutilized Credit and Suppression Allegations
The Tribunal analyzed the procedural history of the company's credit transactions, noting the transition from Rule 57F(4) to Rule 57AC and the subsequent changes in credit mechanisms. The company's failure to adapt to the new rules and coordinate between sections resulted in the unutilized credit balance. The Tribunal concluded that the transfer of the unutilized credit to the regular Cenvat account was not permissible due to the nature of the credit and the lack of duty implications. The Tribunal disagreed with the suppression allegations, emphasizing the absence of intent to evade duty payment. It directed the original authority to re-adjudicate the case, considering the company's lack of malicious intent and suggesting a fair resolution without financial losses to either party.

In conclusion, the Tribunal set aside the lower authorities' orders and allowed the appeal by remand, emphasizing the need for a just resolution without penalties due to the absence of intentional wrongdoing.