2014 (10) TMI 126 - AT - Central Excise

CENVAT Credit - Notification 35/2003-CE dated 10.04.2003 - Relevant documents not produced - Held that - Duty on the fabrics was introduced with effect from 01.04.2003 and Rule 9A of the CENVAT Credit Rules, 2002, was introduced for availment of CENVAT Credit on the fabrics lying in the factory of the assessee as on 31.03.2003, Notification No. 35/2003 provides that if any assessee is not able to produce the documents of paying duty for availment of credit, then they can avail the credit on the formula prescribed as per the said Notification. It is not disputed that the appellant has taken the CENVAT credit without producing the duty paying documents as per the formula prescribed as per Notification 35/2003 dated 10.04.2003. A buyer of fabrics, who is unable to produce the document evidencing actual payment of duty are entitled to avail credit as per Rule 9A(2) of the CENVAT Credit Rules, 2002 - to avail Cenvat Credit on the fabrics lying in stock on 31.03.2003, the appellants were not required to produce any documentary evidence of duty paid on the fabrics as per Rule 9A(2) of the CENVAT Credit Rules, 2002. - Decided in favour of assessee.

Summary

Issues:
- Demand of duty with interest and penalties on appellants for transitional provisions of CENVAT Credit.
- Validity of the impugned order based on deemed CENVAT credit claimed by the appellants.
- Existence of suppliers and necessity of investigation in availing CENVAT Credit.
- Compliance with Rule 9A of CENVAT Credit Rules, 2002 and Notification 35/2003 dated 10.04.2003.

Analysis:

1. Demand of duty with interest and penalties: The appellants were in appeals against the order demanding duty, interest, and penalties imposed on them for transitional provisions of CENVAT Credit related to the introduction of excise duty on textile articles from 01.04.2003. The appellants claimed deemed CENVAT credit based on stock declarations filed as per Rule 9A of CENVAT Credit Rules, 2002.

2. Validity of impugned order: The impugned order was challenged by the appellants on the grounds that they were entitled to take CENVAT Credit on stocks as on 31.03.2003 without producing duty payment documents, as allowed under Rule 9A(2) and Notification 35/2003. The appellants argued that no investigation into suppliers was necessary as the credit was claimed based on the prescribed formula.

3. Existence of suppliers and investigation necessity: The department initiated proceedings against the appellants due to non-existent suppliers or suppliers denying supplying fabrics. The appellants contended that since they availed CENVAT Credit as per Rule 9A(2) without relying on supplier invoices, no investigation into suppliers was required. The opposing view was that proceedings were rightly initiated based on supplier discrepancies.

4. Compliance with Rule 9A and Notification 35/2003: The judgment emphasized that as per Rule 9A(2) of CENVAT Credit Rules, 2002, appellants were entitled to avail credit on fabrics without producing duty payment documents. The judgment highlighted the provisions allowing credit based on written declarations of stock, excluding the need for supplier details or documents evidencing duty payment.

5. Conclusion: The judgment concluded that the appellants were within their rights to claim CENVAT Credit as per the prescribed rules and notifications. It noted the lack of requirement for investigation into suppliers and criticized the initiation of proceedings without proper approvals. Consequently, the impugned order was set aside, and the appeals were allowed with any consequential relief.

This detailed analysis of the judgment provides insights into the legal reasoning behind the decision and clarifies the issues surrounding the demand of duty, CENVAT Credit provisions, and the necessity of supplier investigations in the given context.