2012 (9) TMI 881 - AT - Central Excise

Denial of CENVAT Credit - Sale of factory - Held that - ER-1 returns showing payment of duty on the final product was being regularly filed by the appellant. Revenue is silent on the payment of duty on the goods manufactured and reflected in the said ER-1. In my views, denial of credit alone without taking into consideration the fact that such credit was used by the appellant for payment of duty on their final product which were got manufactured at Bhiwadi on job work basis is neither just nor proper. The Revenue s entire case is based upon the sale of factory on 2-11-2004. It may not be out of place to mention here that in spite of sale of factory, appellant continued to hold Central Excise licence for manufacture of goods, which was surrendered only on 31-5-2005. The said fact along with the fact of filing of ER-1 returns and payment of duty on the final product make the appellant entitle to the availment and consequential utilisation of Modvat credit. As such I find no reasons to deny the credit to the appellant - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat credit on duty paid raw material.
2. Allegation of carrying out manufacturing activity post-sale of factory premises.
3. Imposition of penalty under Cenvat Credit Rules, 2004.

Analysis:
1. The appellant, engaged in manufacturing activities, faced a Show Cause Notice (SCN) for allegedly carrying out manufacturing post-sale of factory premises, leading to denial of Cenvat credit on duty paid raw material. The Joint Commissioner confirmed a duty demand and imposed penalties, upheld by the Commissioner (Appeals) and Tribunal. However, the High Court remanded the matter for fresh consideration.

2. The High Court emphasized examining whether the appellant continued business post-sale, highlighting the importance of invoices and evidence. The Tribunal then assessed if the appellant ceased manufacturing post-sale, considering the movement of raw material to another unit for job work. The appellant filed ER-1 returns and paid duty on the final product, justifying Cenvat credit utilization. The Tribunal concluded that the sale of the factory did not warrant denying credit, especially as the appellant retained a Central Excise license until a later date.

3. The Tribunal found no grounds to deny credit or impose penalties, citing the appellant's compliance with duty payments and license retention post-sale. The judgment emphasized that the sale of the factory did not preclude the appellant from utilizing Cenvat credit for duty paid on inputs used in manufacturing final products at another unit. Consequently, the impugned orders were set aside, and the appeals were allowed in favor of the appellant.