2007 (4) TMI 76 - AT - Central Excise

Cenvat/Modvat credit - Department contended that appellant had not done any manufacturing process on the goods and knitted fabrics, knitted garments and blankets and accordingly not entitle for credit - Held the department contention was correct

Summary

Issues:
- Admissibility of Cenvat credit under Rule 3 of the Cenvat Credit Rules, 2002
- Imposition of penalty under Rule 13 and Rule 25 of the said Rules

Admissibility of Cenvat credit under Rule 3:
The appellant challenged the order disallowing Cenvat credit of Rs. 1,47,002/-, arguing that even registered dealers in the textile sector could pass on higher credit subject to payment. The appellant contended that removal of goods should be considered as removal of goods as such, justifying the passing on of credit. However, the Department's representative supported the disallowance, stating that the appellant had not conducted any manufacturing process on the goods in question, which were final products like knitted fabrics, garments, and blankets. The authorities held that as the goods were final products and not inputs, the credit was wrongly availed and utilized.

Imposition of penalty under Rule 13 and Rule 25:
The Commissioner (Appeals) upheld the disallowance of Cenvat credit, noting that the appellant, registered as a manufacturer, had not used the goods in question for manufacturing final products. The Commissioner found that the goods did not qualify as "inputs," and thus, no credit could be taken. The penalty imposed was reduced from Rs. 1,47,002/- to Rs. 35,000/-, considering it a procedural lapse. The material on record confirmed that the goods were not used for manufacturing final products, leading to the correct disallowance of Cenvat credit and recovery with interest. The penalty was further reduced to Rs. 10,000/-, as there was no allegation of a guilty mind, and the wrongfully availed duty was reversed, serving the ends of justice.

In conclusion, the Tribunal confirmed the order disallowing the Cenvat credit and reducing the penalty, disposing of the appeal accordingly.