2020 (1) TMI 1342 - AT - Central Excise

Recovery of wrongly availed CENVAT credit - legality and propriety by the competent authority under section 35E of Central Excise Act 1994 - period January 2005 and October 2007 - HELD THAT - The issue of entitlement to avail credit by the recipient of material on which liability to duty has been discharged by the supplier despite non-leviability of duty is now settled by the decision of the Tribunal in M/S NEULAND LABORATORIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE HYDERABAD- I 2013 (11) TMI 1339 - CESTAT BANGALORE where it was held that the assessee may receive inputs/capital goods/services classifiable under almost all the headings it is difficult to imagine that legislature would require the assessee to determine whether duty is payable for all these items or not and then take credit. Even a jurisdictional Central Excise officer may not have all the items listed in the Schedule for assessment. In fact assessment has been taken away even from the Central Excise officer. Appeal dismissed - decided against Revenue.

Summary

Issues involved:
- Appeal against dropping of proceedings for recovery of wrongly availed CENVAT credit
- Entitlement to avail credit by the recipient of material on which duty has been discharged by the supplier

Analysis:
1. The appeal was filed by the Revenue against the order-in-original that dropped proceedings for the recovery of wrongly availed CENVAT credit by M/s Raymond Ltd. The issue arose as the Thane unit, alleged to have ceased manufacturing and restricted to annealing since 2005, supplied materials to the Ganekhadpoli unit. The impugned order found no dispute on duty discharge by the Thane unit or material receipt at the Ganekhadpoli unit, leading to the appeal under section 35E of the Central Excise Act, 1994.

2. The legality and propriety of the order were scrutinized by the competent authority, considering the settled issue of entitlement to avail credit by the recipient of material on which duty liability has been discharged by the supplier. The Tribunal's decision in Neuland Laboratories Ltd v. Commissioner of Central Excise clarified the obligation on the receiver regarding credit availed wrongly, emphasizing that the receiver is not obliged to determine the duty liability for all received items, especially when the duty payment is not required.

3. The Tribunal cited precedents like Commissioner of Central Excise, Pune-III v. Ajinkya Enterprises, where it was held that once duty on final products is accepted by the department, CENVAT credit need not be reversed even if the activity does not amount to manufacture. The direction to file an appeal against the impugned order was issued before these judgments, rendering the grounds of appeal by the Commissioner no longer arguable. Consequently, the appeal of the Revenue was dismissed based on the settled legal principles and precedents.

This detailed analysis of the legal judgment highlights the issues involved, the arguments presented, and the final decision rendered by the Appellate Tribunal CESTAT MUMBAI, preserving the key legal terminology and significant findings from the original text.