2011 (8) TMI 1093 - AT - Central Excise

Summary

Issues involved: Recovery of wrongly availed CENVAT credit u/s Rule 11(2) of CENVAT Credit Rules, 2004 and imposition of penalty.

The judgment by the Appellate Tribunal CESTAT CHENNAI dealt with the case where the assessees availed exemption u/s Notification No. 8/2003-CE and MODVAT credit without paying duty on finished goods and inputs, leading to a show-cause notice for recovery of wrongly availed CENVAT credit and penalty. The lower appellate authority had earlier set aside the demand and penalty, citing a decision by the Larger Bench of the Tribunal. The Revenue appealed this decision.

The Tribunal, after hearing both sides, referred to the apex court's decision in Albert David Ltd. vs Commissioner, which upheld that CENVAT credit shall not be allowed on inputs used in the manufacture of wholly exempted goods. The Tribunal reproduced relevant extracts from its order, emphasizing that CENVAT credit is not permissible for inputs used in the manufacture of exempted goods. The Tribunal also distinguished a previous decision and highlighted the provision for recovery of wrongly utilized CENVAT credit u/s Rule 57 AD.

The Tribunal further noted that the apex court's decision in Albert David has been followed in other cases, emphasizing the need to adhere to this precedent. Consequently, the impugned order was set aside, and the appeal was allowed in relation to duty demand. However, the Tribunal found that no penalty was warranted in this case, as the issue primarily revolved around the interpretation of MODVAT rules.

In conclusion, the appeal was partly allowed by the Tribunal, pronouncing the decision on 18-08-2011.