2018 (8) TMI 1975 - AT - Central Excise

CENVAT Credit - one to one co-relation between the credit taken against inputs/input services to the finish goods cleared on payment of duty - Rule 14 of the Cenvat Credit Rules, 2004 - HELD THAT - The Commissioner (Appeals), without addressing the ground of the availability of sufficient credit reserves, proceeded to uphold the findings of the Assistant Commissioner by passing the impugned Order-in-Appeal No. 101/KOL-V/2017 dt. 21/11/2017. Particularly, it was perfunctorily observed that there was availment and utilization of credit of ₹ 3,34,458/- and that in view of the Board Circular No. 897/17/2009 dt. 3.9.2009 and the Apex Court decision in Union of India v. Ind Swift Laboratories Ltd. 2011 (2) TMI 6 - SUPREME COURT , interest was also recoverable thereon even in the absence of any utilization of credit - The penalty imposed on the appellant was also confirmed in view of the fact that the appellant had admitted to wrongful availment of credit, and that the error was detected in pursuance of audit proceedings. Where the Department had itself acknowledged by the said letter dt. 1.03.2013 that the purported short paid duty was only ₹ 64,972 (incl. of cess), it was not open for them to thereafter allege short payment of duty of another ₹ 3,34,458/- by a subsequent Show Cause Notice issued to the appellant. Notably, the Assistant Commissioner had even observed in the said adjudication order that the payment of ₹ 66,000/- effected by the appellant towards the purported short-paid amount of ₹ 64,972/- was not part of the subject matter of the present dispute. As a result of the actions of the Department, the appellant has ended up paying ₹ 3,67,458/- through PLA and reversing another ₹ 33,000 in its credit register. A total of ₹ 4,00, 458/- has been appropriated by the Department against a dispute that concerned wrongly availed credit of only ₹ 3,34,458/-. Evidently, by seeking to recover ₹ 3,34,458/- by the said adjudication order, the Department is attempting to recover duty of ₹ 64,972/- twice, and also recover an additional duty of ₹ 2,69,486/- though credit to such extent was not utilized by the appellant as aforesaid. Further, since it is the trite law that there is no one to one correlation between the credit taken against inputs/input services to the finished goods cleared on payment of duty by the concerned assessee, there can be no utilization of the disputed credit if there was sufficient/surplus undisputed credit balance left even after meeting the duty requirements for the said period. Even for the month of march, 2012, there can be no basis for recovering interest on the wrongly availed credit - there has been no short payment of duty on the part of the appellant during the said period as alleged, particularly in view of there being no utilization of credit as aforesaid, and in view of the purported short paid duty of ₹ 64,972/- having already been paid by the appellant in a prior Rule 8 (3A), CER, 02 proceeding, which the Department chose not to pursue. The impugned demand under Rule 14 of the Cenvat Credit Rules, 2004 for recovery of ₹ 3,34,458/- therefore entails double recovery of duties already collected by the State. There can be no basis for recoveries purportedly confirmed by the said appellate order dated 21.11.2017 of duty, interest and/or penalty under Rules 14 and 15 of the Cenvat Credit Rules, 2004 read with Sections 11A and 11AC of the Central Excise Act, 1944, for the said period - Appeal allowed - decided in favor of appellant.

Issues:
1. Availment of Cenvat Credit on Education Cess and Secondary and Higher Education Cess paid on imported inputs.
2. Demand of Cenvat Credit, interest, and penalty under Rule 15 (2) of CCR, 2004 read with Section 11 AC(b) of the Central Excise Act, 1944.
3. Appeal against the Adjudication Order upheld by Ld. Commissioner (Appeals) leading to the present appeal before the Tribunal.
4. Allegation of mis-utilization of credit and availability of sufficient credit reserves.
5. Discrepancy in the demand amount and utilization of credit.
6. Application of Rule 14 of the Cenvat Credit Rules, 2004 and its amendments.
7. Invocation of extended period and imposition of penalty.
8. Recovery of interest on wrongly availed credit.
9. Interpretation of the doctrine of revenue neutrality in the context of Cenvat Credit Rules, 2004.
10. Conclusion and setting aside of the impugned order with consequential benefits to the appellant.

Detailed Analysis:
1. The case involved the appellant company engaged in manufacturing Speciality Steel Wires, availing Cenvat Credit on Education Cess and Secondary and Higher Education Cess paid on imported inputs. The Adjudicating Authority confirmed the demand of Cenvat Credit, interest, and imposed a penalty under relevant provisions. The appeal was filed against this order, which was upheld by the Ld. Commissioner (Appeals), leading to the present appeal before the Tribunal.

2. The appellant contended that there was no mis-utilization of credit as there were sufficient credit reserves available, challenging the basis of the demand. The discrepancy in the demand amount and utilization of credit was highlighted, questioning the imposition of penalty under Rule 15 (2) of CCR, 2004.

3. The Tribunal observed that the Commissioner (Appeals) did not address the ground of sufficient credit reserves and upheld the findings without proper consideration. The appellant's argument regarding the availability of credit reserves and non-disputed credit balance was not adequately dealt with in the previous orders.

4. The Tribunal analyzed the application of Rule 14 of the Cenvat Credit Rules, 2004, emphasizing the conditions precedent for recovery under the rule. The appellant's submission regarding the misutilization of credit due to sufficient credit reserves not being disputed was considered in detail.

5. The Tribunal noted the Department's actions leading to the appellant paying an amount higher than the disputed credit, indicating a double recovery of duties already collected. The lack of loss of revenue was emphasized, leading to the conclusion that there was no basis for the recoveries confirmed in the impugned order.

6. The interpretation of the doctrine of revenue neutrality in the context of the Cenvat Credit Rules, 2004 was discussed, citing relevant legal precedents and decisions. The Tribunal applied the principles laid down by the Apex Court on revenue neutrality to the case, concluding that there was no evidence of short payment of duty or loss of revenue, hence no basis for the recoveries demanded.

7. In the final decision, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, granting consequential benefits. The detailed analysis covered various legal aspects, including the interpretation of rules, application of precedents, and the assessment of factual circumstances to arrive at the judgment.

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