2014 (1) TMI 1567 - AT - Central Excise

Denial of CENVAT Credit - Credit on return clearances to Shipping Corporation of Karwar of Electrostatic Liquid Cleaner - Credit taken when goods were not in factory - Held that - Goods have been returned back to the appellant although after a gap of 3 days and same has been cleared on payment of duty. Therefore, the only lapse on the appellant is that they have not followed the proper procedure. For not following the proper procedure, credit cannot be denied. Accordingly, I hold that the appellant are entitled to credit as said goods have been cleared on payment of duty. Therefore, impugned order for denial of CENVAT credit is set aside to the extent only - Decided in favour of assessee.

Summary

Issues:
Denial of credit on return clearances to Shipping Corporation of Karwar of Electrostatic Liquid Cleaner.

Analysis:
The appellant appealed against the impugned order denying credit on return clearances to Shipping Corporation of Karwar of Electrostatic Liquid Cleaner amounting to Rs. 1,93,050/-. The appellant cleared the goods, paid duty on 02.03.1998, but upon realizing the error in clearance to Shipping Corporation, Karwar, they promptly informed their customer and the Range Superintendent. Subsequently, they canceled the invoice on 03.03.1998 and received the goods on 06.03.1998. A show-cause notice was issued for denial of credit due to the procedural lapse of taking credit before receiving the goods. The appellant contended that the goods were eventually received, and the credit should not be denied as the department was aware of the situation. The show-cause notice was issued on 25.09.2002, beyond the extended period of limitation.

The counsel for the appellant argued that the procedural lapse was due to a transportation problem, and the goods were received in the factory after a delay of 3 days. The appellant had cleared the goods on payment of duty, and the denial of credit was unjustified. On the contrary, the ld. AR supported the findings of the impugned order.

After hearing both sides and considering the submissions, the judge acknowledged that the goods were returned to the appellant, albeit with a delay, and were cleared on payment of duty. The only fault found was the procedural lapse by the appellant in not following the correct procedure. The judge ruled that the credit could not be denied solely on this basis. Consequently, the appellant was deemed entitled to the credit as the goods had been cleared on payment of duty. Therefore, the impugned order denying CENVAT credit was set aside partially, and the appeal was allowed with any consequential relief.

This judgment highlights the importance of procedural compliance in claiming credit on return clearances and emphasizes that a procedural lapse alone may not justify the denial of credit if the goods were cleared on payment of duty.