2014 (5) TMI 453 - AT - Central Excise

CENVAT Credit - as there was shortage of space in their factory therefore, some inputs were temporarily stored in other premises outside the factory - Held that - The fact that these inputs were later-on received back by the assessee in their factory and the same has been used for the manufacture of their final product is not in dispute. Therefore, in the light of the judgement in the case of Teletube Electronics Ltd. (2013 (9) TMI 932 - ALLAHABAD HIGH COURT) wherein the Hon ble High Court of Allahabad held that if the goods on which duty has been paid were removed from the factory premises either for the shortage of space or that the goods were required to be polished, entitled to benefit of credit on re-entry. The learned A.R. has failed to produce any contrary decision to the above decision of the Hon ble High Court of Allahabad. Therefore, I hold that as the goods have been received back in their factory, the assesses are entitled to take credit. The proceedings initiated against the assessee by way of show-cause notice are dropped and the appeal is allowed with consequential relief, if any - Decided in favour of assessee.

Summary

Issues:
1. Denial of CENVAT credit on goods by the Revenue.
2. Appeal against dropping of penalty imposed on the assessee by the Commissioner.

Analysis:
1. The assessee appealed against the denial of CENVAT credit on goods by the Revenue. The case involved inputs cleared by the assessee without recording them in their books, leading to a show-cause notice to deny the credit. The adjudicating authority based the denial on the failure to seek permission as per Rule 6 of Central Excise Rules, 2002 for removing the inputs. The Commissioner confirmed the demand but waived the interest and penalty. The assessee argued that despite not seeking permission, the inputs were later used in manufacturing, citing precedents like CCE v. Teletube Electronics Ltd. and Sanchita Polymers vs. CCE. The Tribunal, considering these arguments, held that since the goods were received back and used in final product manufacturing, the assessee was entitled to the credit. Consequently, the proceedings were dropped, and the appeal was allowed, with the Revenue's appeal being dismissed.

2. The second issue involved the Revenue's appeal against the dropping of the penalty imposed by the Commissioner. The Revenue contended that the assessee contravened Rule 6A of Central Excise Rules, 2002 by not recording the removal of inputs in their statutory records. However, the Tribunal, after considering both parties' submissions, found that the inputs were indeed received back by the assessee and used in manufacturing. Relying on the judgment in the case of Teletube Electronics Ltd., the Tribunal concluded that the assessee was entitled to take credit. As a result, the proceedings initiated through the show-cause notice were dropped, and the appeal was allowed in favor of the assessee, with consequential relief granted if necessary. The Revenue's appeal was dismissed.