2007 (11) TMI 38 - AT - Central Excise

Denial of credit Custom not accepted B/E Dept. is not allowed to take advantage of its own wrongs No upper most limit prescribed for allowing credit No evidence shown by Dept. to deny credit Dispute settled by Settlement Commission is not indicative of appellant s malafides Credit allowed

Summary

Issues:
Denial of Modvat credit and imposition of penalties under Cenvat Credit Rules, 2002.

Analysis:
1. The appellants imported iron ore pallets and cleared almost the entire consignment without waiting for assessment or out of charge orders.
2. Customs authorities refused to accept the remaining bills of entry, leading to a dispute settled before the Settlement Commission in 2003.
3. The show cause notice in 2005 sought to disallow Cenvat credit based on various grounds, including lack of proper records and non-payment of duty.
4. The Commissioner denied the credit and imposed penalties after considering the submissions made by the appellants.
5. The appellants argued that they should not be denied credit as they paid the duty and settled the dispute before the Settlement Commission.
6. The Commissioner agreed with some contentions of the appellants but denied credit due to alleged fraud and mala fides.
7. The appellants contended that the denial of credit was unjustified as they made efforts to file bills of entry and paid duty.
8. The Tribunal found that the denial of credit on technical grounds was not justified as the duty was paid by the appellants.
9. The Tribunal held that the appellants' actions were not fraudulent and that the denial of credit based on procedural grounds was unwarranted.
10. The Tribunal noted that the Customs authorities' refusal to accept bills of entry should not result in denial of credit to the appellants.
11. The appellants' right to avail Cenvat credit was protected under Section 38A of the Central Excise Act, 1944.
12. Transitional provisions under Rule 9 of the Cenvat Credit Rules, 2002, allowed for the utilization of credit earned under erstwhile rules.
13. The credit availed by the appellants in March 2004 was not late considering the circumstances of the case.
14. The denial of credit based on improper record-keeping was unfounded as the department had acknowledged the maintenance of due records in previous proceedings.
15. The Tribunal set aside the impugned order, allowing both appeals with consequential relief to the appellants.

This detailed analysis highlights the key arguments, findings, and legal principles involved in the judgment issued by the Appellate Tribunal CESTAT, Ahmedabad in 2007 regarding the denial of Modvat credit and imposition of penalties under the Cenvat Credit Rules, 2002.