2011 (3) TMI 1095 - AT - Central Excise

Cenvat credit - assessee removed plastic waste on payment of duty to their other sister concern which were received back from their sister concern - They availed cenvat credit on their own invoices - SCN issued to the appellants proposing denial of the credit on the ground that they are not entitled to avail cenvat credit on the basis of their own invoices - Held that - No doubt the appellant should not have availed the credit before the actual receipt of the goods. But once the same are received, he becomes entitled to the modvat credit. As such, it is only a question of time gap between taking of credit and actual receipt of the goods. The same cannot be made basis for denial of the credit. Even according to the appellate authority, appellants were entitled to take the credit. If that be so, they become entitle to take the credit on the day of receipt of the goods. The denial of the credit on the ground that the same was taken before the date of receipt of the goods is not consonance of the principle of justice - Decided in favour of assessee.

Summary

Issues:
1. Availment of cenvat credit on own invoices before receipt of goods.
2. Matching description and quantity of goods received.
3. Denial of credit by appellate authority before actual receipt of goods.

Analysis:

Issue 1: Availment of cenvat credit on own invoices before receipt of goods
The appellant, engaged in manufacturing plastic film, removed waste to a sister concern and later received it back. The show cause notice proposed denying credit of Rs. 8,32,467 on the grounds of credit availed before goods receipt and mismatch in description/quantity. The original authority confirmed the demand and penalty. The Commissioner (Appeals) ruled in favor of the appellant, citing Rule 16(1) of Central Excise Rules and a Board circular. However, the Commissioner held that credit taken before goods receipt should be denied, confirming duty, interest, and penalty. The Hon'ble Member disagreed, stating that once goods are received, credit is justified, regardless of timing. Denying credit based solely on timing is unjust, as the appellant was entitled to credit upon goods receipt.

Issue 2: Matching description and quantity of goods received
The Commissioner (Appeals) found in favor of the appellant regarding the description and quantity of the waste received back. The appellant had already paid duty for shortages. The Hon'ble Member concurred with this finding, emphasizing that there was no dispute about the return of the waste and the appellant's entitlement to credit for the duty paid on the returned waste.

Issue 3: Denial of credit by appellate authority before actual receipt of goods
The Commissioner (Appeals) had denied credit due to the appellant taking credit before actual goods receipt. However, the Hon'ble Member disagreed with this reasoning, stating that once goods are received, the appellant is entitled to the credit. Emphasizing that the denial of credit based on the timing of credit availed is not just, the Member set aside the impugned order, allowing the appeal with consequential relief to the appellant.