2009 (12) TMI 825 - AT - Central Excise

Summary

Issues:
- Disallowance of Cenvat credit on inputs used for galvanisation.
- Imposition of penalties on the respondent company and individuals.
- Recovery of interest on irregularly availed credit.

Analysis:
1. Disallowance of Cenvat credit on inputs used for galvanisation:
The case involved the disallowance of Cenvat credit on inputs used for galvanisation by the respondent's company. The original authority disallowed the credit based on the argument that galvanisation did not amount to manufacture as per a Board's Circular. The Commissioner (Appeals) upheld this disallowance, emphasizing that the inputs were used for a non-manufacturing activity, resulting in non-excisable products. The Tribunal concurred with this decision, stating that credit on inputs used in non-excisable activities is not eligible. The Tribunal also held that interest on irregularly availed credit is recoverable, supporting the original authority's order.

2. Imposition of penalties on the respondent company and individuals:
The original authority imposed a penalty of Rs. 2 lakhs on the respondent company, along with penalties on the Director and authorised signatory. The Commissioner (Appeals) reduced the penalty on the company to Rs. 1,37,277/-, considering the amount already paid before the show cause notice. The Tribunal found the reduction justified and declined the Department's request to enhance the penalty. It noted the lack of rationale for the original penalty amount and upheld the Commissioner's decision. Additionally, the Tribunal found no specific evidence of omission or commission by the Director and authorised signatory, leading to the penalties being set aside by the Commissioner (Appeals) and affirmed by the Tribunal.

3. Recovery of interest on irregularly availed credit:
Regarding the recovery of interest on irregularly availed credit, the Tribunal held that once credit is irregularly utilized, interest becomes recoverable. The Tribunal supported the original authority's decision to demand interest along with the disallowed credit amount. This ruling was based on the principle that interest should be levied on credit that was availed and utilized irregularly, emphasizing the importance of compliance with Cenvat credit regulations.

In conclusion, the Tribunal upheld the disallowance of Cenvat credit on inputs used for galvanisation, supported the reduction of penalties imposed on the respondent company, and affirmed the recovery of interest on irregularly availed credit. The decision highlighted the importance of adhering to excise regulations and ensuring proper utilization of Cenvat credit in manufacturing activities to avoid penalties and interest charges.