2012 (5) TMI 533 - AT - Central Excise

Duty demand - Availment of CENVAT Credit - Demand from Second stage dealer or manufacturer - Held that - The respondent in the present case is not the manufacturer of final product who has availed the credit. He is a registered dealer with the central excise deptt. and his status, i.e., as to whether he can be considered to be second stage dealer or so as to pass on the credit of duty, is being disputed. Revenue has confirmed the demand against the said respondent dealer and not against the manufacturer to whom the inputs stands sold and credit passed - appellant is a registered dealer. In terms of Rule 12 of Central Excise Rules, demand of wrongly availed Cenvat credit can be made only from the manufacturer. Appellant was not a party to the entire transactions and has availed the credit on the basis of invoices issued by M/s. Gautam Steel Traders who had represented themselves to be a first stage dealer. As such, there was no mala fide on the part of the respondent to consider themselves as second stage dealer and to act accordingly. I find no reasons for imposition of penalty upon them. I find that even in the case of SDL Auto P. Ltd. 2010 (1) TMI 377 - CESTAT, NEW DELHI , where the demand of wrongly availed Cenvat credit was confirmed against the manufacturer, the Tribunal set aside the penalty even on the person who availed the credit by observing that there is no evidence that they knew about the irregular passing of the credit by M/s. Gautam Steel Traders to M/s. Metal Trading Company who in turn passed on credit to them. As such in the absence of any evidence, I find no reason to impose penalty upon the respondent - Rectification granted.

Summary

Issues:
1. Confirmation of demand of duty against the dealer.
2. Imposition of penalty on the dealer.
3. Applicability of earlier Tribunal's decision in a similar case.

Analysis:

Confirmation of demand of duty against the dealer:
The case involved a central excise registered dealer who was alleged to have availed Cenvat credit improperly. The Revenue contended that the dealer, acting as a second stage dealer, could not pass on the credit of duty paid on inputs to the manufacturer. However, the Commissioner (Appeals) set aside the demand of duty and penalty, stating that the dealer was indeed a second stage dealer based on the invoices issued by the first stage dealer. The Tribunal noted that according to Rule 12 of the Central Excise Rules, demand for wrongly availed Cenvat credit can only be made from the manufacturer, not the dealer. Therefore, the Tribunal agreed with the Commissioner (Appeals) that confirming the demand against the dealer was not justified.

Imposition of penalty on the dealer:
Regarding the penalty imposed on the dealer, the Tribunal found that there was no evidence of mala fide intent on the part of the dealer. The dealer had relied on the representations made by the first stage dealer in issuing invoices and passing on the credit. The Tribunal also referenced a previous case where penalties were set aside due to lack of evidence of knowledge about irregular credit passing. Consequently, the Tribunal concluded that there was no basis for imposing a penalty on the dealer in the present case.

Applicability of earlier Tribunal's decision:
The Revenue had cited a previous Tribunal decision in the case of SDL Auto P. Ltd. where the appeal was allowed based on similar facts. However, the Tribunal distinguished the present case from the earlier decision as the nature of the parties involved and the position of the dealer differed. The Tribunal emphasized that the earlier decision did not apply to the current scenario where the demand was against the dealer, not the manufacturer. Therefore, the Tribunal rejected the Revenue's appeal and upheld the Commissioner (Appeals)'s decision.

In conclusion, the Tribunal dismissed the Revenue's appeal, modified the previous order, and rejected the demand of duty and penalty against the dealer based on the legal interpretations and findings discussed above.