2007 (7) TMI 136 - AT - Customs

Credit of CVD on ship Credit taken before out of charge is undeny able especially when customs clearance and receipt of duty paid inputs in the factory were at the same place, namely, the shipyard Credit on fuel and oil inside engine of motor ship is not allowed

Summary

Issues:
- Denial of credit and imposition of penalty by the Commissioner for taking credit before the grant of out of charge by Customs.
- Disallowance of Cenvat credit wrongly taken on fuel and oil inside the engine room of the ship.
- Demand of central excise duty and imposition of penalty by the Commissioner.

Analysis:

Issue 1: Denial of credit and imposition of penalty
The appellant imported a ship for breaking, and customs duty was paid on 14-9-2004. The Commissioner disallowed the credit taken by the appellant before the grant of out of charge by Customs on 14-10-04. The Commissioner also imposed a penalty of Rs. 25 lakhs. The appellant argued that the delay in granting out of charge should not justify the denial of credit as the shipyard and factory were in the same premises. The Tribunal noted that the delay in granting out of charge did not justify denying the Cenvat credit on the duty paid on the vessel. The Tribunal considered it a technical violation caused by the delay in the Department's action, which should not deprive the appellant of their substantial right to Cenvat credit, especially when customs clearance and receipt of duty paid inputs were simultaneous at the same place.

Issue 2: Disallowance of Cenvat credit on fuel and oil
The Commissioner disallowed Cenvat credit of Rs. 17,617 wrongly taken on fuel and oil inside the engine room of the ship. The appellant did not contest this disallowance. The Tribunal upheld this disallowance as it was a clear case of wrongly taken credit.

Issue 3: Demand of central excise duty and penalty
The Commissioner demanded central excise duty of Rs. 3,89,551 and imposed a penalty on the appellant. The Tribunal found that since the credit was rightly taken, there was no irregularity in utilizing the Cenvat credit amount before 14-10-04. Considering the peculiar facts and circumstances of the case, the Tribunal allowed the appeal except for the denial of Cenvat credit on fuel and oil inside the engine room of the ship.

In conclusion, the Tribunal allowed the appeal, setting aside the denial of credit and penalty, except for the disallowance of Cenvat credit on fuel and oil inside the engine room of the ship.