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2014 (9) TMI 736 - AT - Central ExciseCENVAT Credit - excessive credit passed by the dealer - Whether a dealer could have passed on higher credit @ 12% when credit was available only @8% - Held that - It is admitted by Commissioner (Appeals) in his order that wrongful higher credit has been availed by M/s ABS Steels Ltd. Bhilai. Duty Paid by SAIL was 8%, however, credit passed by M/s ABS Steel was 12%. Acting as dealer and clearing inputs as such, they could not have passed on credit at 12%. This is basic principle of law unless specified otherwise. Once it is evident, excess passing of credit is unlawful manifesting intent to cause subterfuge to revenue. Case laws referred by revenue also amplify the position. Commissioner (Appeals) despite accepting the facts on record, has tried to justify passing on higher credit by the respondents on a ground which is totally unlawful and flimsy. Further it is also evident that respondent i.e. M/s D.M. Engineering (Respondent No. 2) have not taken adequate steps to ensure that no extra credit is availed. Fraud prevention steps are inbuilt in Rule 7 (2) of Cenvat credit Rules 2002. Small effort at their level would have clearly brought out that original material has suffered duty @8% but credit has been passed on @12%. It is clearly established that M/s D.M. Engineering Ltd. (Respondent No. 2) has passed extra amount of credit by manipulating entries in record. Through credit @ 8% was availed, however credit @ 12% has been passed by way of illegal means. Fraudulent intent is clearly manifested. Reversal of excess credit is justified as claimed by revenue. Of course, invocation of penal action is also justified. - Decided against Revenue.
Issues:
1. Appeal against Order-in-Appeal No. 125-126/RPR-II/2006 dated 15.12.2006. 2. Violation of Cenvat Credit Rules by M/s ABS Steels Ltd. and M/s D.M. Engineering Ltd. 3. Discrepancy in duty payment and credit passing between the two companies. 4. Imposition of penalties and recovery of interest. Issue 1: Appeal against Order-in-Appeal No. 125-126/RPR-II/2006 dated 15.12.2006 The Revenue filed an appeal against the Order-in-Appeal passed in respect of M/s ABS Steels Ltd. and M/s D.M. Engineering Ltd. The Commissioner (Appeals) had set aside the Order-in-Original confirming a demand of &8377; 11,55,492 and cess along with penalties on M/s ABS Steel Ltd. and imposed penalties on M/s D.M. Engineering Ltd. The appeals were consolidated for a consolidated decision. Issue 2: Violation of Cenvat Credit Rules by M/s ABS Steels Ltd. and M/s D.M. Engineering Ltd. M/s ABS Steels Ltd. was found to have violated the Cenvat Credit Rules by clearing inputs purchased from M/s SAIL to M/s D.M. Engineering Ltd. without complying with the rules regarding credit utilization. The Department alleged that M/s ABS Steels Ltd. wrongly availed and utilized credit, and M/s D.M. Engineering Ltd. passed on excess credit to customers in contravention of the rules, leading to demands, cess, and penalties. Issue 3: Discrepancy in duty payment and credit passing between the two companies The case involved discrepancies in duty payment and credit passing between M/s ABS Steels Ltd. and M/s D.M. Engineering Ltd. The duty paid by M/s ABS Steels Ltd. was at 8%, but when clearing inputs to M/s D.M. Engineering Ltd., the credit passed was at 12%, which was unlawful. The Commissioner (Appeals) acknowledged this discrepancy but attempted to justify it, which was deemed unlawful and a potential threat to the tax structure and governmental policy. Issue 4: Imposition of penalties and recovery of interest After considering submissions, the Additional Commissioner confirmed duty, cess, and penalties on M/s ABS Steels Ltd. and imposed penalties on M/s D.M. Engineering Ltd. The Commissioner (Appeals) set aside the original order based on lack of evidence of willful misstatement or suppression of facts. However, the Tribunal upheld the Revenue's appeal, emphasizing the unlawful passing of excess credit and fraudulent intent by M/s D.M. Engineering Ltd., justifying the reversal of excess credit and penal action. This detailed analysis of the judgment highlights the issues of appeal, violation of Cenvat Credit Rules, discrepancies in duty payment and credit passing, and the imposition of penalties and recovery of interest, providing a comprehensive understanding of the legal proceedings and decisions involved in the case.
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