2016 (11) TMI 511 - AT - Central Excise

Recovery of improperly availed CENVAT credit - Rule 3 (1) and Rule 9 (1) of Cenvat Credit Rules, 2004 - Held that - the appellants have reversed the credit based on a wrong advice at the time of internal audit which subsequently was found to be wrong and accordingly they took re-credit. This is only a technical adjustment. I find that the issue at hand is fully covered by decision of this very Tribunal in the case of Godrej Sara Lee Ltd. Vs CCE Pune 2012 (9) TMI 166 - CESTAT, CHENNAI where it was held that As such, the erroneous reversal made by the appellants, prompted by wrong audit objection and an inapplicable circular, has been rectified by the appellants by taking the suo motu credit of the reversed amount which is not the same as taking refund of excess duty amount paid. Demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Reversal of excess credit availed, validity of recredit taken, applicability of Cenvat Credit Rules, 2004, show cause notice seeking recovery, original authority's decision confirmation, appeal against proposed demand.

Analysis:
The case involved the appellant reversing an amount of ?17,52,664 with interest based on internal audit findings of excess credit availed. The appellant later realized the error, took recredit of the same amount, and informed the department. A show cause notice was issued seeking recovery, alleging improper credit availed under Rule 3(1) and Rule 9(1) of Cenvat Credit Rules, 2004. The original authority and Commissioner (Appeals) upheld the demand, leading to the current appeal.

The appellant argued that the credit taken was legitimate as part of the original invoice, passed on by their sister unit, and was reversed initially due to incorrect advice. The appellant relied on a High Court judgment to support their case. On the other hand, the respondent contended that the appellant's suo motu reassessment was impermissible.

Upon hearing both sides, the tribunal found that the show cause notice did not dispute the eligibility of the reversed amount to the appellant. It was acknowledged that the reversal was due to wrong advice during internal audit, later rectified by the appellant. The tribunal referenced a previous case to support the technical adjustment made by the appellant, emphasizing that the issue was covered by existing tribunal decisions.

The tribunal concluded that the demand was not sustainable, setting aside the impugned order and allowing the appeal. The appellant was directed to deposit any amount equivalent to the credit for a specific period, while the penalty was waived, and considerations were made for interest paid. The decision was dictated and pronounced in open court, marking the resolution of the case.