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2011 (6) TMI 520 - AT - Central ExciseCenvat credit - suppression/under-valuation - M/s. CPCL has approached to the Settlement Commission and without accepting the allegation in the show-cause notice, opted to settle the matter by paying duty and the interest which has been considered by the Settlement Commission while settling the issue wherein M/s. CPCL has been given immunity from penalty and prosecution. Therefore, the allegation of suppression has not attained finality as the same has not been adjudicated Held that - By approaching to the Settlement Commission, the allegation has not been proved against M/s. CPCL, as the allegation of the show-cause notice remained unproved. As the allegation against M/s CPCL has not been proved, the denial of CENVAT credit under Rule 9(1)(b) to the appellant is not sustainable. appeal allowed
Issues:
1. Denial of CENVAT credit under Section 11A of Central Excise Act read with Rule 14 of CENVAT Credit Rules, 2004. 2. Applicability of Settlement Commission's order granting immunity and its impact on allegations of suppression. 3. Interpretation of Rule 9(1)(b) of CENVAT Credit Rules, 2004 regarding denial of credit based on fraud, collusion, or suppression of facts. Analysis: 1. The appellant contested the denial of CENVAT credit amounting to Rs.14.7 crores under Section 11A of Central Excise Act and Rule 14 of CENVAT Credit Rules, 2004 for the period between September 2004 to June 2006. The department issued a show-cause notice alleging suppression of facts by the input-supplier, which led to demands, interest, and penalty. The appellant's appeal challenged this order. 2. The Settlement Commission granted immunity to the input-supplier, M/s. CPCL, from penalty and prosecution under the Central Excise Act, 1944. The appellant argued that since M/s. CPCL obtained immunity, the allegation of suppression against them was not sustainable. They relied on previous judgments and the Settlement Commission's order to support their claim. 3. The key point of contention was the interpretation of Rule 9(1)(b) of CENVAT Credit Rules, 2004, which allows denial of credit in cases of fraud, collusion, or suppression of facts with intent to evade duty. The appellant argued that the denial of credit based on allegations against M/s. CPCL was not valid as those allegations were not proven, and the Settlement Commission's order granting immunity was crucial in this regard. 4. The Tribunal analyzed the submissions from both sides and emphasized that the allegation of suppression against M/s. CPCL was not adjudicated and remained unproven. The Settlement Commission's order granting immunity to M/s. CPCL indicated that the allegation of suppression had not attained finality. Referring to relevant case law, the Tribunal concluded that mere filing of an application before the Settlement Commission did not equate to admission of charges. As the allegation against M/s. CPCL was unproven, the denial of CENVAT credit to the appellant was deemed unsustainable. 5. Ultimately, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief as necessary. The judgment highlighted the importance of proving allegations of suppression before denying CENVAT credit and emphasized the significance of Settlement Commission orders in such cases.
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