2010 (12) TMI 174 - AT - Central Excise

Recredit of Cenvat - After a lapse of nearly 5 years the appellant took re-credit of the same amounts which was objected to by the Department by issuing show-cause notices on 22/5/2003 - whether an amount of credit reversed voluntarily by the assessee in compliance with the requisition issued by the Range officer could be taken as re-credit in the modvat/cenvat account without Departments sanction - Held that - Departments sanction was required for such re-credit. Undisputedly in the present case no such sanction is forthcoming. - the reversal of credit made by the assesses at the instance of the Range officer was reflected by the modvat account which in due course of time became part of the RG12 returns filed by them and those returns were approved which would mean that the reversal of credit received statutory approval of the proper officer of Central Excise. In that situation it was incumbent on the assessee to seek the sanction of the proper officer before taking re-credit of the same amounts.

Summary

Issues:
1. Availing modvat credit in excess of what was due.
2. Reversal and re-credit of modvat credit amounts.
3. Settlement Commission's orders and their impact on the case.
4. Interpretation of rules regarding re-credit without departmental sanction.

Analysis:
1. The appellants, engaged in manufacturing PVC pipes and compounds, availed modvat credit on inputs during 1994-95 to 1996-97. The Range Superintendent found the credit taken on PVC resin and other inputs to be in excess. The appellants complied with the direction to reverse the excess credit. However, after almost 5 years, they re-credited the same amounts, leading to show-cause notices from the Department citing contravention of Cenvat Credit Rules, 2002. The Commissioner confirmed the proposals except for interest, imposing penalties on the appellants as the credit was not utilized, resulting in the appeals against the Commissioner's orders.

2. The appellants contended that the Settlement Commission's orders on their applications for dispute settlement precluded the Department from issuing show-cause notices seeking to recover the credits taken after reversal. The Settlement Commission did not address the issue of re-credit, leaving it for the appropriate authorities. The Tribunal overruled the objection, stating that the Settlement Commission did not consider the re-credit issue and declined to reopen it.

3. The appellants argued that they were entitled to re-credit as the credits were not utilized and were an indivisible right. They cited various case laws to support their claim. However, the Department argued that re-credit required the Department's sanction, as per the Tribunals Larger Bench decision in BDH Industries Ltd. case. The Department highlighted that the credits were voluntarily reversed and approved by the Central Excise officer, necessitating sanction for re-credit.

4. The Tribunal agreed with the Department, citing the BDH Industries Ltd. case, which mandated Departmental sanction for re-credit. The Tribunal distinguished the case laws cited by the appellants, emphasizing the need for proper sanction before re-crediting voluntarily reversed amounts. As the Department had not provided such sanction, the Tribunal upheld the Commissioner's orders on the substantive issue, resulting in the dismissal of the appeals.