2014 (8) TMI 774 - AT - Central Excise

Cenvat Credit - removal of goods as such versus Trading activity - Interest and equivalent amount of penalty - Held that - In this case it is no doubt that the appellant has imported HR Carbon Steel Plates. It is also not in doubt that the description while clearing the said goods which the appellant shows is HR MS Plates but the invoice clearly indicates that they have reversed the credit taken on the said goods under Rule 3(5) of the Cenvat Credit Rules 2004. This discrepancy came to the knowledge during the course of audit conducted in the factory of the appellant. When a invoice showing that the assessee has cleared the goods as such by reversal of the Cenvat Credit under Rule 3(5) of the Cenvat Credit Rule 2004, no inquiry has been conducted at the end of the buyer and it has also not ascertained from the records that under which invoice the credit has been taken on the said goods. Further, we find that it is not alleged that the appellant has not reversed the Cenvat Credit availed on the said goods. In these circumstances, the allegation of the department that the appellant has imported the said goods for trading activity and not sought any permission for their trading activity is not acceptable. Therefore, the said goods were cleared as such by reversal of the Cenvat Credit as per Rule 3 (5) of the Cenvat Credit Rules 2004, and the reversal of credit is not disputed by the department. In these circumstances, we hold that the duty paid by the appellant at the time of clearance of these goods by reversal of Cenvat Credit amounts to non availment of the Cenvat Credit of the said goods. Therefore the impugned order is not sustainable - Decided in favour of assessee.

Summary

Issues:
- Appeal against confirmed demand of wrongful availment of Cenvat Credit
- Allegation of imported goods being finished goods for trading activity
- Denial of Cenvat Credit, interest, and penalty
- Appellant's claim of importing goods for manufacturing activity
- Discrepancy in description of imported goods
- Reversal of Cenvat Credit under Rule 3(5) of Cenvat Credit Rules 2004
- Department's contention of goods not being issued for production

Analysis:

The appellant appealed against the confirmed demand of Rs. 10,96,41,251 for wrongful availment of Cenvat Credit, interest, and penalty. The Revenue alleged that the imported goods were finished goods for trading activity, not eligible for Cenvat Credit. The appellant, a manufacturer of HR MS Plates, imported HR Carbon Steel Plates for rolling to reduce thickness, intending to clear them after manufacturing. Due to quality issues, some goods were cleared on payment of duty under Rule 3(5) of Cenvat Credit Rules 2004. The appellant argued that no trading activity was intended, hence no permission was needed. The Revenue contended that the imported goods were not issued for production, being different from goods cleared after reversing Cenvat Credit.

Upon hearing both sides, it was established that the appellant imported HR Carbon Steel Plates for manufacturing activity, as the manufacturing process was unfeasible. The appellant cleared goods by reversing Cenvat Credit under Rule 3(5), which was undisputed. The department failed to provide evidence rebutting the appellant's claim of importing goods for manufacturing. The court noted that the duty paid at clearance by reversing Cenvat Credit amounted to non-availment of Cenvat Credit, rendering the impugned order unsustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

This judgment highlights the importance of substantiating claims with evidence in cases of alleged wrongful availment of Cenvat Credit and the necessity to establish the purpose of imported goods to determine eligibility for credit, ultimately emphasizing the significance of adherence to Cenvat Credit Rules in manufacturing activities.