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2016 (3) TMI 617 - AT - Central ExciseCENVAT credit on capital good utilised only for manufacture of finished goods, namely, cotton yarn, which was cleared under Notification No.30/2004-CE, dated 09.07.2004 without payment of duty - Held that - It is seen that the impugned credit was reversed on 13.06.2005, i.e., before even the Show Cause Notice (dated 25.10.2005) was issued. Also it is just that in the initial phase the appellant cleared yarn duty free under Notification No.30/2004-CE. Both Notifications, i.e., Notifications No.30/2004-CE and No.29/2004-CE could be availed of simultaneously by the appellant and it could have cleared one small consignment of say mere ₹ 100/- on payment of duty under Notification No.29/2004-CE on the date it took the impugned Cenvat credit, in which case arguably, there would have remained no basis to initiate these proceedings. Thus, it is evident that there was no mala fide on the part of the appellant in the present case. Further, it is seen that the recovery of the impugned amount was ordered in terms of Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944. As the impugned amount was reversed even prior to issuance of Show Cause Notice in this case, even issuance of Show Cause Notice to demand the impugned credit was not necessary. In these circumstances, imposition of penalty is not warranted in this case. The appeal is allowed by way of remand to the primary adjudicating authority for de novo adjudication with the direction that the appellant s contention that from 02.02.2006, the capital goods were utilised for manufacture of dutiable goods also should be examined and if found to be correct, then the impugned CENVAT credit should be allowed w.e.f. 02.02.2006.
Issues involved:
Admissibility of CENVAT credit on capital goods used for manufacturing exempted goods, reversal of impugned credit, applicability of Notifications No. 30/2004-CE and No. 29/2004-CE simultaneously, necessity of penalty imposition. Analysis: 1. Admissibility of CENVAT credit on capital goods: The case involved a dispute regarding the admissibility of CENVAT credit amounting to Rs. 45,33,836/- on capital goods used exclusively for manufacturing exempted goods. The appellant argued that from a certain date, the capital goods were also used for manufacturing dutiable goods, justifying the allowance of credit from that date. The Tribunal referred to precedents like Brindavan Beverages Pvt. Ltd. case and held that if capital goods are intended for use in both dutiable and exempted final products, credit cannot be denied based on the order of usage. The judgment in Oswal Woollen Mills Pvt. Ltd. case further supported that if the final product is not fully exempted, denial of credit is not justified. 2. Reversal of impugned credit and applicability of Notifications: The impugned credit was reversed before the issuance of the Show Cause Notice, indicating no mala fide intention on the part of the appellant. The Tribunal noted that both Notifications No. 30/2004-CE and No. 29/2004-CE could have been availed simultaneously, potentially avoiding the dispute. As the impugned amount was reversed prior to the notice, the imposition of penalty was deemed unwarranted. The Tribunal highlighted that the appellant's claim of starting to pay duty on cotton yarn from a specific date was not raised earlier and needed examination by the lower authorities. 3. Necessity of penalty imposition: Considering the circumstances where the impugned credit was reversed before the Show Cause Notice and the potential simultaneous applicability of Notifications, the Tribunal ordered a remand to the primary adjudicating authority for fresh adjudication. The direction was to examine the appellant's claim of using capital goods for manufacturing dutiable goods from a certain date and allowing the credit accordingly. The Tribunal concluded that penalty imposition was not justified in this case. In conclusion, the judgment emphasized the importance of intention and usage patterns of capital goods in determining the admissibility of CENVAT credit and highlighted the necessity for a thorough examination of facts before imposing penalties.
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