2016 (10) TMI 760 - AT - Central Excise

Denial of CENVAT credit u/r 9(10(b) of the CENVAT Credit Rules, 2004 - payment of duty on detection of the fact of under-valuation of imported goods - amount paid by reason of fraud, collusion, suppression of facts with the intention to evade payment of duty - whether denial of CENVAT credit on the ground that the non-levy or short levy of duty was occasioned by fraud, collision, wilful mis-statement, which falls under the restricted provisions of Rule 9(1)(b) of CENVAT Credit Rules, 2004 justified? - Held that - the decision in the case of BOSCH CHASSIS SYSTEMS INDIA LTD. Versus CCE., DELHI-III, GURGAON 2008 (9) TMI 106 - CESTAT NEW DELHI relied upon where it was held that mere filing of application before Settlement Commission for waiver of interest, penalty and immunity from prosecution and suo motu payment of duty, not amounts to admission of guilt, fraud, collusion etc. Since the appellant himself paid the differential duty into the Govt. exchequer and availed the CENVAT credit on the strength of the challans duly certified by the DRI officials, the restriction provided in Rule 9(1)(b) is not applicable and the appellant is eligible to avail the CENVAT credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Admissibility of CENVAT credit based on challans certified by the Directorate of Revenue Intelligence (DRI).
2. Application of Rule 9(10)(b) of the CENVAT Credit Rules, 2004.
3. Settlement Commission's Final Order dated 28.03.2011 and its impact on the present case.
4. Interpretation of Rule 9(1)(b) of the CENVAT Credit Rules, 2004.

Issue 1: The appellant availed CENVAT credit based on DRI-certified challans, disputed by the Central Excise Department due to under-valuation of imported goods and subsequent payment of differential duty by the supplier. The Department contended that fraud, collusion, and suppression of facts disallowed the credit under Rule 9(10)(b) of the CENVAT Credit Rules, 2004.

Issue 2: The appellant argued that the Settlement Commission's Final Order dated 28.03.2011 established the non-payment of duty as a bona fide mistake, allowing for the admissibility of CENVAT credit based on valid duty paying documents under Rule 9 of the CENVAT Credit Rules, 2004. The appellant cited relevant case laws to support their position.

Issue 3: The Settlement Commission's Final Order determined the appellant's mistake as bona fide, precluding charges of fraud or suppression. As the Show Cause Notice was challenged before the Settlement Commission, the embargo under Rule 9(1)(b) did not apply, and the lower authorities could not adjudicate the matter without an order on the Notice.

Issue 4: The Tribunal found that Rule 9(1)(b) restrictions apply only when goods are sold with an invoice issued as per Central Excise Rules, not when goods are consumed internally without sale. As the appellant paid the differential duty and availed credit based on DRI-certified challans, the Rule's restriction did not apply, making the appellant eligible for CENVAT credit.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant based on the Settlement Commission's findings, the interpretation of Rule 9(1)(b), and the appellant's compliance with duty payment and credit availing procedures.