2014 (7) TMI 435 - AT - Central Excise

CENVAT credit - removal as such - removal of glass bottles and crates - recovery of credit not reversed - scope of recovery after insertion of Explanation to Rule 3(5) erstwhile rule 3(4) w.e.f. 1.3.2003 - whether without the explanation, recovery proceedings could have been initiated or not - Held that - the explanation is only clarificatory in nature and a study of the relevant provisions would clearly show that even without the invocation of Rule 3(4) (presently Rule 5), the amount was recoverable. Even though learned counsel sought time for making further submissions, the learned AR vehemently opposed it stating that on the one hand the learned counsel has submitted a totally new ground during the course of hearing and on the other hand when he finds that Bench was not very responsive to his submissions, he is seeking time. - Appeal has no merit- Decided against assessee.

Summary

Issues Involved:
1. Non-payment of appropriate duty on the removal of inputs.
2. Applicability of previous Tribunal decisions.
3. Responsibility for maintaining records and evidence.
4. Limitation and revenue-neutrality.
5. Legal provision for recovery of duty.

Issue-wise Detailed Analysis:

1. Non-payment of appropriate duty on the removal of inputs:
The appellants were found to have cleared 11,17,200 glass bottles and 33,400 crates valued at Rs. 89,26,000 to their sister concerns without discharging the appropriate duty of Rs. 14,28,160 at the rate of 16%. As per Sub Rule 1(C) of Rule 57 AB of the Central Excise Rules, 1944, and Sub Rule (4) of Rule 3 of the CENVAT Credit Rules, 2001/2002, when inputs or capital goods on which CENVAT credit has been taken are removed as such, the manufacturer must pay an amount equal to the duty of excise leviable on such goods. The appellants failed to raise any invoice and cleared the goods under private documents, later issuing consolidated Central Excise invoices and paying the duty.

2. Applicability of previous Tribunal decisions:
The appellants cited a previous Tribunal decision involving their Visakhapatnam unit, where the Tribunal allowed an appeal regarding the clearance of plastic crates to a sister unit on the grounds that no CENVAT credit was availed on those crates. However, the Tribunal in the current case distinguished the facts, noting that the appellants' authorized signatory could not confirm whether CENVAT credit was taken on the glass bottles and crates cleared. The Tribunal emphasized the need for proper verification and evidence, which was lacking in the present case.

3. Responsibility for maintaining records and evidence:
The Tribunal highlighted that under the CENVAT Credit Rules, it is the responsibility of the assessee to account for goods received and to ensure proper records are maintained. The appellants failed to maintain evidence or records to show that the cleared goods were those on which no CENVAT credit was taken. The Tribunal found that the appellants did not conduct any verification or maintain proper accounts, leading to the conclusion that they did not fulfill their legal obligations.

4. Limitation and revenue-neutrality:
The appellants argued that the demand was time-barred and that the situation was revenue-neutral, as the receiver unit could have taken credit. The Tribunal rejected this argument, noting that the appellants did not follow the proper procedures, did not raise central excise invoices, and did not include the details in their returns. The Tribunal concluded that there was suppression of facts with intent to evade duty, justifying the invocation of the extended period for demand.

5. Legal provision for recovery of duty:
The appellants contended that there was no provision in the law for recovery of duty not paid under Rule 3(4) prior to 2013. The Tribunal rejected this argument, stating that the explanation added to Rule 3(5) in 2013 was clarificatory and that recovery proceedings could have been initiated under Rule 14, which provides for the recovery of CENVAT credit wrongly taken or utilized. The Tribunal emphasized that the provisions of Rule 14 applied mutatis mutandis for effecting such recoveries.

Conclusion:
The Tribunal found no merit in the appeal and rejected it, upholding the demand for duty, interest, and penalty. The Tribunal emphasized the importance of maintaining proper records and complying with legal obligations under the CENVAT Credit Rules.