2016 (8) TMI 1025 - AT - Central Excise

Cenvat credit - rubber used in the factory - rubber used in excess quantity than required - Held that - it is now settled that if following three conditions are satisfied then Cenvat credit cannot be denied. The conditions are that that the inputs have suffered Central Excise duty, inputs have entered the factory premises and inputs are used in the manufacture of final products that they are not cleared as such. We do not find any allegation in the show cause notice that the appellants had not procured the inputs nor that the inputs had not suffered Central Excise duty nor that the input were cleared as such by the appellant. In fact there is no investigation in respect of above stated aspects as reflected in the impugned order. The adjudicating authority was not empowered by law to decide optimum quantity of input admissible to be procured for manufacture of unit quantity of final product and therefore, law did not empower the adjudicating authority to decide how much is the excess quantity of inputs procured by the appellant. - Appeal disposed of

Summary

Issues:
1. Denial of Cenvat credit on rubber used in excess quantity.
2. Disallowance of Cenvat credit on short inputs found in the factory.
3. Recovery of Cenvat credit on steel inputs.
4. Imposition of penalties on the appellants.

Analysis:
1. The appellants were engaged in manufacturing various products and availing Cenvat facility. A show cause notice was issued proposing to deny Cenvat credit on rubber used in excess quantity, short inputs, and steel inputs. The impugned order disallowed Cenvat credit on rubber, short inputs, and steel inputs, imposing substantial penalties on the appellants. The appellants challenged this order, arguing that there were no allegations in the notice regarding the procurement, duty payment, or usage of the inputs, and that the authority lacked the power to determine excess input quantity.

2. The Tribunal considered the submissions and found that the Revenue's case was based on presumption rather than concrete evidence. It was established that Cenvat credit cannot be denied if inputs have suffered Central Excise duty, entered the factory premises, and were used in manufacturing final products. The show cause notice did not address key aspects such as input procurement, duty payment, or clearance, indicating a lack of investigation by the adjudicating authority.

3. The Tribunal held that the adjudicating authority exceeded its legal mandate by determining the optimal input quantity for manufacturing final products and deciding on excess input procurement. Consequently, the Cenvat credit on rubber amounting to a significant sum was deemed admissible to the appellants. The impugned order was set aside regarding the denial of Cenvat credit, interest, and penalties, with a reduction in the personal penalty imposed on one individual.

4. Ultimately, the Tribunal ruled in favor of the appellants, allowing the Cenvat credit on rubber and providing consequential relief. The penalties were reduced, and the appellants were not charged any costs. The judgment was pronounced in court on 26-05-2016 by the Appellate Tribunal CESTAT ALLAHABAD, with detailed analysis and legal reasoning provided for each issue raised in the appeals.