2013 (1) TMI 326 - AT - Central Excise

Clearance of the inputs as such - Denial of Cenvat credit - Rule 15(2) of Cenvat Credit Rules, 2004 - Assessee is engaged in manufacturing of detergent powder/cake, emulsifier - Under Chapter 34 of the Central Excise Tariff Act, 1985 - Appellants factory was closed and no production of said product - Avail CENVAT credit by procuring one of the raw materials during that period - Raw material so obtained was being cleared as such under the cover of invoices - Reverse the Cenvat credit so availed - Rule 2(k)(i) of Cenvat Credit Rules, 2004 - Rule 3(4)(b) of the Cenvat Credit Rules - Held that - In the absence of any mala fide and keeping in view that entire activity was within the framework of the provisions of Cenvat Credit Rules, it s not a justifiable reason to impose penalties on the appellants. Service tax for inward transportation of the sulphur in their factory. Admittedly, the said Service tax stand paid by them for transporting the goods in their factory and in terms of Cenvat Credit Rules, they are entitled to avail the credit of Service tax so paid. At the time of clearance of the inputs as such, there is no requirement of law for reversal of input services credit. The appellants are entitled to use said credit, as and when they start the production of their final product. As such, on this ground, also I find no reason to impose penalty. In favour of assessee

Summary

Issues:
Penalty imposed under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

Analysis:
The appeal challenged penalties totaling Rs. 8,54,172/- and Rs. 40,687/- imposed on the appellant under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The appellant, engaged in manufacturing detergent powder/cake and emulsifier, had its factory closed during a specific period. The appellant procured sulphur from two manufacturers, availed duty credit, and cleared the sulphur to another entity without using it in production. The original adjudicating authority denied Cenvat credit but imposed penalties, a decision upheld by the Commissioner (Appeals).

Upon review, the Tribunal noted that under Rule 2(k)(i) of Cenvat Credit Rules, a manufacturer can avail credit for inputs received in the factory. Rule 3(4)(b) allows the utilization of credit for inputs removed as such. Despite the unusual practice of immediately sending inputs to another party after availing credit, the Tribunal found no additional credit was taken. The Tribunal concluded that as the activity was within the legal framework, lacked mala fide intent, and did not involve extra credit, penalties were unjustified. The appellant also availed Service tax credit for inward transportation of sulphur, which was deemed legitimate under the Cenvat Credit Rules without the need for reversal at input clearance. Therefore, the Tribunal set aside the penalties imposed on the appellant, allowing the appeal in this regard.

In summary, the Tribunal's judgment focused on the legality of availing and utilizing Cenvat credit for inputs, emphasizing compliance with the Cenvat Credit Rules. The decision highlighted the absence of mala fide intent and the adherence to legal provisions in clearing inputs 'as such.' The Tribunal's analysis underscored the entitlement to Service tax credit for transportation without penalty, ultimately setting aside the penalties imposed on the appellant.