2017 (2) TMI 1145 - AT - Central Excise

Benefit of N/N. 214/86 dated 25.03.86 - denial on the ground that the sister concern has taken benefit of N/N. 49-50/2003 dated 10.06.2003 - Held that - As per CCR, 2004, when the assessee manufacturing dutiable goods, the assessee is entitled for benefit of input used in manufacturing of dutiable goods - as the respondent is paying duty in their final product, the respondent is entitled to take cenvat credit on inputs used in manufacturing of their final product. Penalty u/s 11AC - Held that - there is no allegation that the respondent was having mala-fide intention not to pay duty, as per provisions of Section 11AC of the Act. As contents of the Section 11AC are missing, therefore, the Ld. Commissioner (A) has rightly dropped the penalty against the respondent. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Duty payment by respondent without registration
- Claiming cenvat credit on inputs used in manufacturing tractor parts
- Allegations of contravention of Central Excise Rules
- Penalty imposition based on mala-fide intention

Analysis:
1. Duty Payment Without Registration: The respondent cleared excisable goods without registration with the Central Excise Department and without payment of duty. The Preventive Department found that the respondent was involved in manufacturing tractor parts without proper registration. The respondent's sister concern was clearing the final product, i.e., tractor, on payment of duty. However, due to an exemption claimed by the sister concern, the tractor became exempt from duty payment, making the parts manufactured by the respondent dutiable. The respondent paid duty along with interest during the proceedings, which was acknowledged by the tribunal. The tribunal held that as per the Cenvat Credit Rules, 2004, the respondent, manufacturing dutiable goods, was entitled to claim cenvat credit on inputs used in manufacturing the final product, as established in the case of Dai Ichi Karkaria Ltd. Vs. Collector.

2. Cenvat Credit Claim: The tribunal examined the entitlement of the respondent to claim cenvat credit on inputs used in manufacturing the tractor parts for which duty was demanded. It was established that the respondent paying duty on the final product allowed them to avail cenvat credit on inputs used in manufacturing. The tribunal referred to legal precedence to support this entitlement, thereby upholding the benefit of cenvat credit granted to the respondent by the Ld. Commissioner (Appeals).

3. Allegations of Contravention of Central Excise Rules: The show cause notice alleged that the respondent contravened various provisions of the Central Excise Rules, including Rule 4, 5, 6, 8, 9, and 12. However, there was no accusation of mala-fide intention on the part of the respondent to evade duty payment, as required by Section 11AC of the Act. The absence of evidence regarding mala-fide intention led the tribunal to agree with the decision of the Ld. Commissioner (A) in dropping the penalty against the respondent.

In conclusion, the tribunal found no fault in the impugned order and upheld the decision to grant cenvat credit to the respondent. The appeal by the Revenue was dismissed, affirming the entitlement of the respondent to claim cenvat credit on inputs used in manufacturing dutiable goods.