2007 (9) TMI 146 - AT - Central Excise

SCN issued only on basis of audit objection Held that by mere change of opinion proceedings cannot be initiated as there is no intention to evade duty Inputs used in jobwork resulting with the dutiable output Credit cannot be denied to avoid cascading effect in absence of double claim of credit

Summary

Issues:
1. Whether input credit shall be denied if the input has given rise to output and such output has suffered duty in absence of double claim of Cenvat credit, and whether consent to deposit demand in view of audit finding confers jurisdiction to issue show cause notice.
2. Proper invoking of Cenvat credit by the job worker.

Analysis:

Issue 1:
The appellant argued that the show cause notice issued was merely a change of opinion without any intention to evade duty, making the proceeding under Section 11A of the Central Excise Act unsustainable. The appellant contended that input credit should not be denied to avoid cascading effect, citing various decisions supporting this view. The Tribunal has consistently held that if the input has led to output that has suffered duty, input credit cannot be denied. The appellant emphasized that the intention of the legislature is to prevent cascading effect by allowing Cenvat credit. The Tribunal agreed that in the absence of evidence of double claiming of Cenvat credit and duty paid on the output, denying Cenvat credit would be unjust. The show cause notice was found to lack a basis beyond an audit objection, and consent to deposit demand did not confer jurisdiction to issue the notice.

Issue 2:
The Revenue argued that the manner of invoking Cenvat credit by the job worker was improper, and the lower Appellate Authority's decision should not be interfered with. However, the Tribunal found that the factual aspects were well-documented, and the Revenue had sufficient knowledge of the appellant's operations. The Tribunal concluded that the appellant should not be charged belatedly based on an audit finding that did not establish an intention to evade duty. The audit's role was limited, and it could not recommend levies or suggest interpretations of the law that would be unjust. The Tribunal set aside the impugned order on the grounds of limitations and merit, ruling in favor of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the impugned order should be set aside both on the grounds of limitations and merit. The appellant succeeded in their argument that input credit should not be denied when the input leads to duty-paid output and that the show cause notice lacked a valid basis beyond an audit objection.