2011 (4) TMI 956 - HC - Central Excise

Cenvat credit -Tribunal holding that the assessee could not be denied the Cenvat credit, when admittedly he has paid the excise duty - assessee has a factory at New Delhi where they manufacture semi-finished ayurvedic medicines. His understanding was the said products are not excisable. Therefore, the assessee cleared those goods to their sister unit at Bangalore without payment of duty. The Excise Department was of the view that it is excisable to tax and when it was demanded by the Excise officials, the assessee has deposited the said amount. After depositing the said amount, the assessee took cenvat credit - manufacturer has to pay tax at the point of clearance and then collect it from his customers. Once, he pays the tax, he is entitled to avail the credit and subsequently utilize the same. At any rate, for the fault of the department, the assessee cannot be made to suffer, appeal are answered in favour of the assessee and against the revenue. No merit in this appeal and accordingly, it is dismissed

Summary

Issues:
Challenge to Tribunal's order allowing Cenvat credit based on excise duty payment.

Analysis:
The appeal was filed by the revenue challenging the Tribunal's decision allowing the assessee to claim Cenvat credit since the assessee had paid the excise duty. The assessee, having a factory in New Delhi, believed that the products they manufactured were not excisable and thus cleared them to their sister unit in Bangalore without paying duty. However, upon demand by the Excise Department, the assessee deposited the duty amount and claimed Cenvat credit at the Bangalore factory. The Commissioner of Central Excise in New Delhi initially imposed a penalty, which was later set aside in appeal. Subsequently, the excise authorities in Bangalore challenged the credit taken by the assessee, leading to further proceedings. The Tribunal, after considering the facts, held that the assessee was entitled to the credit of the duty deposited.

The substantial questions of law admitted for consideration included whether the Tribunal was correct in allowing credit based on supplementary invoices, whether the credit was admissible for goods not received with prescribed documents, and whether the credit was permissible for goods deemed non-excisable. The Tribunal's decision was in favor of the assessee, emphasizing that the goods were not excisable as per the Appellate Authority's final order. The Tribunal found that the assessee, having paid the tax, was entitled to avail the Cenvat credit and utilize it subsequently. The judgment highlighted that the assessee should not suffer due to the department's fault, and the substantial questions of law were answered in favor of the assessee, leading to the dismissal of the appeal filed by the revenue.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the assessee, having paid the excise duty and being entitled to Cenvat credit, should not be penalized for the department's insistence on duty payment. The judgment favored the assessee, highlighting that once the tax was paid, the credit could be availed, and the substantial questions of law were resolved in favor of the assessee. The appeal by the revenue was dismissed, indicating no merit in challenging the Tribunal's order allowing the Cenvat credit based on the payment of excise duty by the assessee.