2013 (12) TMI 577 - AT - Central Excise

Eligibility for cenvat credit Clandestine removal of goods Capital goods purchased from registered dealer Whether the appellant is eligible to avail CENVAT Credit Held that - Having discharged the duty liability on the capital goods subsequently, after the clearance will itself an indicator that CENVAT Credit availability of Central Excise duty paid on such capital goods is barred as there was suppression and mis-statement by the manufacturer - Though the appellant has claimed that they were not aware of non-duty paid character of the goods received by them from a registered dealer - the appellant s Deputy General Manager has clearly admitted that the entire transaction of over-valuing the capital goods and making the payment to the registered dealer was in order to square up the account of the outstanding payments due - there is an element of doubt as to the contentions raised by the appellant that they were not aware of such clearances of capital goods by the manufacturer without payment of duty. Once there is over-valuation of value of capital goods, which were cleared by the manufacturer, subsequently having been affirmed that there was something wrong in the transaction - the appellant is in-eligible to avail CENVAT Credit - though the manufacturer of capital goods paid the duty, the same was not available as credit to the appellant as per the provisions of Rule 9(1)(b) of CENVAT Credit Rules, 2004. Period of limitation - The Revenue authorities have issued a show cause notice to the appellant on detecting irregularity within one year of the payment of Central Excise duty by the manufacturer and from the date of TR-6 challan which the manufacturer had paid the duty - the appellant may be in knowledge of entire transaction that has taken place which has resulted in clandestine removal of the goods by manufacturer Decided against Assessee.

Summary

Issues:
1. Remand from High Court for fresh decision on factual aspects and issues of fraud and collusion.
2. Eligibility of the appellant to avail CENVAT Credit on capital goods purchased from a registered dealer involved in a case of non-duty paid goods.
3. Allegations of malafide transactions and over-valuation leading to denial of CENVAT Credit.
4. Interpretation of CENVAT Credit Rules, 2002/2004 in the context of clandestine removal of goods and subsequent payment of duty by the manufacturer.
5. Consideration of appellant's awareness of the non-duty paid character of the goods and implications on CENVAT Credit eligibility.
6. Application of legal defenses and case laws in determining the appellant's liability.

Analysis:

1. The judgment pertains to a remand from the High Court directing the Tribunal to re-decide the case comprehensively, focusing on all factual aspects and issues of fraud and collusion. The Tribunal was instructed to make a fresh decision without influence from prior orders, emphasizing completion by a specified date.

2. The main issue revolved around the appellant's eligibility to claim CENVAT Credit on capital goods purchased from a registered dealer involved in a case of non-duty paid goods. The appellant contended they were not aware of the fraudulent activities of the manufacturer and had reversed the amount with interest, arguing against penalty imposition.

3. The Additional Commissioner alleged malafide transactions and over-valuation, suggesting the appellant was aware of the transaction nature. The investigation revealed the manufacturer cleared goods without duty payment, casting doubt on the appellant's claim for CENVAT Credit.

4. The Tribunal analyzed the CENVAT Credit Rules, highlighting that credit cannot be availed on goods clandestinely removed without duty payment, even if subsequently paid. The appellant's admission of over-valuation raised suspicions, leading to the denial of CENVAT Credit under Rule 9(1)(b) of the CENVAT Credit Rules, 2004.

5. Despite the appellant's arguments of lack of awareness regarding non-duty paid goods, the Tribunal found discrepancies in the transaction, indicating potential knowledge. The Deputy General Manager's statement admitting the transaction's purpose to settle outstanding dues further weakened the appellant's case for CENVAT Credit.

6. The Tribunal dismissed the appeal, citing the appellant's potential involvement and ineligibility for CENVAT Credit due to the suspicious nature of the transaction. Legal defenses and case laws cited by the appellant were deemed irrelevant, given the distinct facts of the case and the apparent awareness of the transaction details.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive overview of the legal arguments, findings, and conclusions reached by the Tribunal in the case.