2013 (7) TMI 307 - AT - Central Excise

Cenvat Credit - Forged DEPB Scrips - Extended period of limitation - As per the case of CC (Preventive) vs. Aafloat Textiles (I) P. Ltd. decided by the Apex Court, vide judgment reported in 2009 (2) TMI 75 - SUPREME COURT , wherein in a case where the importer had made duty free imports against DEPB strips purchased from another person and subsequently DEPB strips were found to be forged, the Apex Court following the principle of caveat emptor, held that the duty would be recoverable from the importer and for this purpose, the extended period under proviso to Section 28 of the Customs Act, 1962 would be applicable. Held that - Ratio of the above judgment of the Apex Court is applicable to this case as sub-rule (5) of Rule 9 of Cenvat Credit Rules, 2004 emphasises that burden of proof regarding the admissibility of the Cenvat credit shall lie upon the manufacture taking such credit - It is for the manufacturer taking Cenvat credit on the basis of an invoice issued by a manufacturer or registered dealer to ensure that the credit is correctly taken Higher Cenvat Credit availed to be recovered - Decided against the assessee. Penalty - No dispute that the invoices issued by the registered dealer were having reference to the manufacturer s invoices - The manufacturers invoices had not been enclosed by the registered dealer and as such, the appellant on the basis of the invoices issued by the registered dealer not were in a position to know as to whether higher credit has been passed on Held that - In the circumstances of the case, they would not be liable for penalty under Rule 15 (2) of Cenvat Credit Rules, 2004, readwith Section 11AC of the Central Excise Act, 1944. - Decided in favor of assessee.

Summary

Issues:
1. Alleged wrongful availment of Cenvat credit by the appellant based on higher credit passed on by a registered dealer.
2. Dispute regarding recovery of Cenvat credit and imposition of penalty on the appellant.

Issue 1: Alleged wrongful availment of Cenvat credit:
The appellant, a pressure cooker manufacturer, purchased brass rods from a registered dealer who had been passing on higher credit than the duty actually paid. The department alleged that the appellant wrongly availed Cenvat credit of Rs. 62,000 during the disputed period. Initially dropped by the Deputy Commissioner, the case was reviewed by the Commissioner (Appeals) who confirmed the Cenvat credit demand, interest, and penalty. The Commissioner held that the appellant failed to take reasonable steps to ensure only admissible credit was availed, despite the registered dealer passing on higher credit. The appellant contended that they had no knowledge of the fraud committed by the dealer and should not be penalized for it. The Departmental Representative argued that the appellant should have taken precautions to ensure correct credit was availed, as per Rule 9 (5) of Cenvat Credit Rules. The Tribunal held that the appellant was not eligible for Cenvat credit due to the fraud committed by the dealer, invoking the extended recovery period but setting aside the penalty.

Issue 2: Dispute regarding recovery and penalty imposition:
The Tribunal noted that the registered dealer had passed on higher credit than the duty paid, leading to the appellant availing the same. The Tribunal referred to a similar case decided by the Apex Court to emphasize that the burden of proof regarding the admissibility of Cenvat credit lies with the manufacturer. Applying this principle, the Tribunal held that the appellant was not eligible for the credit and the extended recovery period would apply. However, the Tribunal ruled that the appellant would not be liable for penalty under Rule 15 (2) of Cenvat Credit Rules, 2004, read with Section 11AC of the Central Excise Act, 1944. Consequently, the impugned order confirming the Cenvat credit demand was upheld, while the penalty imposed on the appellant was set aside.

In conclusion, the judgment upheld the recovery of Cenvat credit but set aside the penalty imposed on the appellant, emphasizing the manufacturer's responsibility to ensure the correctness of credit availed based on invoices issued by registered dealers.