2016 (8) TMI 835 - AT - Central Excise

Demand - recovery of Cenvat credit on capital goods, Central excise duty alongwith interest and penalty and a short levy - credit was taken prior to receipt of input into the factory - Held that - it is found that the CBEC Circular 645/36/2002-CX., dated 16.7.2002 provided that if the capital good are written off before use then the Cenvat credit availed has to be reversed. In the present case, there were no allegation that the capital goods were not used at all nor there were allegations that the Capital goods were removed from factory. We, therefore, hold that the Original Order demanding Cenvat credit, interest thereon and penalty equal to the same is not sustainable. Also there are no allegation that the inputs were not at all received in to the factory. Therefore, the demand of Cenvat credit and interest thereon and penalty equal to same is not sustainable. In respect of short levy, it is found that no evidence has been produced to establish that additional consideration was received by appellants. The levy required as per transaction value was discharged. Therefore, original order is not sustainable to extent of confirmation of Central Excise duty, interest thereon and penalty equal to the same. - Decided in favour of assessee with consequential relief

Summary

Issues involved:
1. Recovery of Cenvat credit on capital goods written off.
2. Cenvat credit taken before actual receipt of inputs.
3. Short levy of Central Excise duty on durable and returnable packaging.

Analysis:
1. The appellant was issued a show cause notice for not reversing Cenvat credit on certain goods written off in the books of account, leading to a proposal for recovery of a specific amount. The Adjudicating Authority confirmed the demand of Central Excise duty and imposed penalties based on CBEC Circular instructions. The appellant contested, arguing that during the relevant period, there were no provisions to reverse Cenvat credit on capital goods not removed from the factory but written off. The Tribunal considered the contentions and ruled that since there were no allegations of non-use or removal of capital goods, the demand for Cenvat credit recovery was not sustainable. The appeal was allowed concerning this issue.

2. Another issue was the appellant taking Cenvat credit before the actual receipt of inputs, leading to a demand for recovery. The Tribunal noted that there were no allegations of inputs not being received in the factory. Therefore, the original order confirming the demand for Cenvat credit and related penalties was deemed unsustainable, and the appeal was allowed on this issue as well.

3. The third issue involved a short levy of Central Excise duty on durable and returnable packaging. The appellant argued that no additional consideration was received, and the duty was discharged as per the transaction value. The Tribunal found no evidence to establish the receipt of additional consideration and held that the original order confirming the short levy of duty, interest, and penalty was not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.