2014 (6) TMI 62 - AT - Central Excise

Waiver of pre depsoit - CENVAT Credit - sending goods on Job work without receiving the goods in factory premises - inputs marked for another unit - Penalty under Rule 15 - Held that - Prima-facie, we find that the Assessee is given facility of sending the inputs out and out to the job workers without receiving the same in their factory for certain processes so as to same expenditure on account of transport charges. In the present case, the Applicants have not followed the prescribed procedure, even though, they have purchased un-slitted coils of 1260 mm from M/s SAIL and before receiving the same in their factory, sent to the job workers for slitting it into different sizes so as to make it suitable for its use in the factory for further manufacture. Prima-facie, we find that at the time of slitting of the coils, the Applicants themselves were aware of the fact that some slitted coils cannot be used in the Garia factory, where the cenvat credit were to be taken, but to be used at their Falta Unit meant for export. Prima-facie, we also find that subsequent clearances of the slitted coils meant for Falta Zone, were not unloaded in the factory and consequently, not in accordance with law and the procedure laid down under the Cenvat Credit Rules, 2004, namely, Rule 4 (5)(a) of the said Rules. At this stage, it is difficult to appreciate that whether the procedures followed by the Applicants are leading to revenue neutral situation or otherwise. Hence, in our opinion, the Applicants are not able to make out a prima-facie case for total waiver of predeposit - Conditional stay granted.

Summary

Issues:
Application for waiver of predeposit of cenvat credit and penalty under Rule 15 (2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

Analysis:
The Applicant, engaged in manufacturing lock nuts, availed cenvat credit on duty shown in invoices from M/s SAIL for HR Coils, which were sent to job workers for slitting. They reversed credit for coils not used at Garia Unit but sent to Falta Unit for export. The ld. Consultant argued the exercise was revenue neutral, with no intention to avail wrong credit. The ld. A.R. contended the Applicant did not follow Cenvat Credit Rules as coils meant for Falta Unit were not usable at Garia Unit, violating Rule 3(1) and Rule 2(k) of the Rules. The Tribunal found the Applicant failed to follow prescribed procedures, being aware some slitted coils were unsuitable for Garia Unit but meant for Falta Unit. The subsequent clearance of coils for Falta Zone without unloading in the factory was deemed non-compliant with Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The Tribunal held the Applicant did not establish a prima facie case for total waiver of predeposit, directing a deposit of Rs.25,00,000 within eight weeks, with non-compliance leading to dismissal of the appeal.

This judgment highlights the importance of adherence to Cenvat Credit Rules for claiming credits on inputs and using them as specified under the Rules. It underscores the necessity for businesses to follow prescribed procedures to ensure compliance with the law and avoid potential penalties. The Tribunal's decision emphasizes the need for taxpayers to demonstrate a prima facie case for waiver of predeposit, taking into account the intent of both the revenue authorities and the taxpayer. The case serves as a reminder for businesses to carefully assess and follow the relevant regulations to prevent disputes and ensure a transparent and lawful tax environment.