2012 (3) TMI 247 - AT - Central Excise

Wrong availment of Modvat Credit on capital goods - conducted physical stock verification at the premises of the three units it was noticed that the shortages of Yo Frooti was on account of clearances to their own unit in the same premises i.e. from Yo Frooti Unit to Agro Unit and there was surplus of modvat inputs in the premises of other unit(s) - overall there was no shortage or excess - Yo Frooti unit had procured capital goods for the manufacture of finished goods and declared that the actual use was for packing of Yo Frooti which was exempt from duty but revenue contented that there was no manufacture of mineral water in the Yo Frooti unit at that time and wrongly availed the duty credit of Rs.23,91,513/- on capital goods. Held that - the goods (both the finished goods as well as raw materials) were found in the same premises, it cannot be held that there was an intention to evade duty or to avail ineligible Cenvat credit on inputs, which were found short in premises of one unit but available in the premises of other unit so it will be considered an offence of a technical nature rather than any removal without payment of duty. From the records of the case it is seen that at the time of receipt of the capital goods, the product Yo Frooti was completely exempt from duty and Yo Frooti became dutiable only after a gap of few months and the eligibility for Cenvat credit has to be determined at the time the goods are received from the manufacturer and if the goods become dutiable subsequently and the manufacturer of goods puts the capital goods to other use, the same will not revive the question of admissibility of modvat credit on capital goods - direct the appellant to make a pre-deposit of Rs.11,50,000/- within a period of eight weeks and report compliance on 10/04/2012

Summary

Issues:
- Condonation of delay in filing the appeal
- Allegations of wrong availment of Modvat Credit
- Shortages of goods and Modvat inputs found during inspection
- Denial of Modvat credit on capital goods
- Confiscation of goods and imposition of penalties
- Prima facie view on shortage/excess of stock
- Eligibility for Cenvat credit on capital goods

Condonation of delay in filing the appeal:
The appeal, stay applications, and applications for condonation of delay were filed against an order passed by the Commissioner of Central Excise. The delay in filing the appeal was due to confusion regarding the number of appeals to be filed, as the registry initially informed the need for only one appeal instead of three. The Tribunal found the reasons for the delay satisfactory and admitted the appeals for consideration.

Allegations of wrong availment of Modvat Credit:
The case involved three units operating from the same premises with separate Central Excise registrations. Allegations were made regarding the wrong availment of Modvat Credit on capital goods and shortages of goods and Modvat inputs were found during an inspection. The Commissioner confirmed duty demands on finished goods found short in each unit and imposed penalties. Additionally, Modvat credit on capital goods was denied in one unit.

Denial of Modvat credit on capital goods:
The appellant argued that the goods seized and provisionally released were subsequently cleared on payment of duty. They contended that since all units operated from the same premises, there was no intention to evade duty. The Tribunal considered the time of availing Cenvat credit on capital goods and directed the appellant to make a pre-deposit of dues concerning capital goods credit.

Prima facie view on shortage/excess of stock:
The Tribunal noted that the issue of shortage/excess of stock was technical in nature, as goods found short in one part of the premises were found in excess in another part of the same premises. They opined that there was no need to penalize the appellants for shortages found elsewhere in the same premises.

Eligibility for Cenvat credit on capital goods:
Regarding the eligibility for Cenvat credit on capital goods, the Tribunal referred to a previous case and upheld that the eligibility for credit must be determined at the time of receiving the goods. They directed the appellant to make a pre-deposit of a specific amount related to capital goods credit within a specified period.

This comprehensive analysis covers the various issues addressed in the legal judgment delivered by the Appellate Tribunal CESTAT, MUMBAI.