2007 (5) TMI 96 - AT - Central Excise

Cenvat/Modvat - Department contended that appellants are not manufacturers to claim the benefit under Rule 16 and accordingly demand were made along with interest and penalty - Held that department contention was correct and allowed

Summary

Issues:
1. Interpretation of Rule 16 of Central Excise Rules for claiming CENVAT credit.
2. Applicability of Rule 16 to non-manufacturers receiving processed materials.
3. Imposition of penalty for wrongly availed credit.

Analysis:
1. The appeals revolve around the interpretation of Rule 16 of the Central Excise Rules concerning the entitlement to CENVAT credit. The appellants, M/s. Pushpam Synthetics and M/s. Govind Enterprises, claimed benefits under Rule 16 for materials received from a processor after a specific date. The original authority disallowed the credit, leading to demands for duty, interest, and penalties. The Commissioner (Appeals) upheld these decisions.

2. The Tribunal analyzed whether Rule 16, which allows credit of duty on goods brought to the factory for re-making or processing, applies to non-manufacturers like the appellants. It was argued that receiving processed materials, taking credit, and subsequently clearing them does not qualify the appellants as manufacturers under Rule 16. The Tribunal noted that the processor had already availed transitional credit for the materials, and the appellants seeking a second benefit was not permissible. The appellants were not considered dealers of raw materials, and no grounds were presented to challenge the Commissioner's findings.

3. Regarding the imposition of penalties, M/s. Pushpam Synthetics argued that any wrongful credit availed was not intentional, and they had paid duty on the cleared products at an enhanced value. The Tribunal acknowledged the absence of malicious intent and set aside the penalty for M/s. Pushpam Synthetics. In contrast, no penalty was imposed on Govind Enterprises. The Tribunal upheld the demand for duty and interest for M/s. Pushpam Synthetics but waived the penalty. However, the appeal by Govind Enterprises was rejected, affirming the duty and interest demands.

In conclusion, the Tribunal rejected the appeals by both M/s. Pushpam Synthetics and M/s. Govind Enterprises concerning the disallowed credit under Rule 16. The judgment emphasized the inapplicability of Rule 16 to non-manufacturers and the consequences of seeking dual benefits for processed materials. The decision differentiated between the imposition of penalties based on the presence or absence of mala fide intentions, ultimately confirming the duty and interest demands while setting aside the penalty for M/s. Pushpam Synthetics.