2017 (2) TMI 1260 - AT - Central Excise

CENVAT credit - capital goods - Merely because the invoices were not available after a period of three to four years, cannot be adopted as a ground for denial of credit but when the same original invoices were available at the time of availing credit - extended period of limitation - Held that - The purpose of allowing the credit of duty paid on the capital goods is to reduce the duty burden on the final product and the cascading effect. Admittedly, when the appellant originally took the credit, all the entries were made in their statutory records and all the returns were also filed with their jurisdictional Central Excise authorities and were attached and all particulars are reflected in ER1 return. In such a scenario, to reject the refund claim for non-production of invoices after a period of 3 to 4 years, is neither justifiable nor warranted - matter needs to be remanded for verification of said invoices - appeal allowed by way of remand.

Summary

Issues Involved:
Dispute over availment of Cenvat credit of duty paid on capital goods, loss of invoices, denial of credit, imposition of penalties, limitation period for proceedings.

Analysis:

Issue 1: Dispute over Availment of Cenvat Credit
The appellant availed 50% of the credit in the first year and the remaining 50% in the subsequent year. However, due to an audit objection and the loss of invoices, proceedings were initiated against them by way of a show cause notice invoking the longer period of limitation. The impugned order denied the credit and imposed penalties.

Issue 2: Loss of Invoices and Denial of Credit
The appellant claimed that the file containing invoices was lost, and they made efforts to procure the invoices from manufacturers or Range authorities. While most invoices were received, some could not be obtained. The appellant argued that the non-availability of invoices after several years should not be a ground for denial of credit, especially when the original invoices were available at the time of availing credit. The appellant maintained records, filed returns, and all particulars were reflected in the ER1 return.

Issue 3: Justifiability of Denying Credit
The purpose of allowing credit on duty paid capital goods is to reduce duty burden and avoid cascading effects. The appellant had made all necessary entries and filings with the Central Excise authorities. The Tribunal found that the appellant could produce most of the invoices subsequently, establishing the duty paid character of the invoices. The matter was remanded for verification of invoices not produced, suggesting examination of corroborative evidence or verification from jurisdictional authorities.

Issue 4: Tribunal Decision
The Tribunal set aside the impugned orders and remanded the matter to the original adjudicating authority for further verification. The Tribunal emphasized the need to establish the duty paid character of the capital goods to determine the appellant's entitlement to credit.

In conclusion, the Tribunal's decision focused on the importance of verifying the duty paid character of the capital goods and the appellant's efforts to produce invoices. The matter was remanded for a thorough examination, considering corroborative evidence and potential verification from relevant authorities to determine the appellant's eligibility for credit.