2017 (8) TMI 1107 - AT - Central Excise

Cenvat credit - reversal of credit on removal of capital goods - Penalty - Held that - appellants had admittedly taken 50% of the credit on both the Auto Coners during the year 2001-02 (on 29.01.2002) in terms of the provisions of Rule 4(2)(a) of CCR - Within two days, under invoice no. 1766 dated 31.01.2002, they transferred one Auto Coner to their Guna Plant. The remaining 50% of the Cenvat credit on both Auto Coners was taken during the year 2002-03 despite the undisputed fact that one of the Auto Coners was not available in their Baddi factory during 2002-03 - Hence, after availing the credit on both the machines, if there was transfer of one of the two Auto Coners to Guna Plant during 2001-02, the right course would have been to debit the full credit of ₹ 5,62,949/- pertaining to the transferred of Auto Coner and to take its full credit at the Guna Plant. It is settled position in law that when a particular thing is directed to be performed in a manner prescribed by Rules, it should be performed in that manner itself and not otherwise. I find that after the detection by audit, the appellants have taken the position that both the plants of the assessee have taken the total credit of ₹ 22,51,796/- only (Rs. 11,25,898/- each per Auto Coner), thus making the total credit so availed equal to due amount of credit. However, that proposition is made in disregard of the Cenvat Credit Rules. In this regard, I find force in the contention of Ld. Commissioner that the appellants could not reversal 100% credit of duty paid on one Auto Coner, which would have been violative of Rule 4(2)(a) of CCR, 2001. The fact of removal of one Auto Coner to Guna Plant, which took place within 2 days of taking credit, was not brought to the notice of the Central Excise Authorities and it was detected only during the course of audit. Hence, the order of Commissioner (Appeals) with regard to penalty is also sustainable - Appeal dismissed - decided in favor of the revenue.

Summary

Issues:
Appeal against impugned order regarding Cenvat credit on capital goods.

Analysis:
1. The appellants, manufacturers of man-made yarn, appealed against an order alleging inadmissible Cenvat credit amounting to ?11,25,898/- on two Auto Coners received in their Baddi Plant during 2001-02 and 2002-03. The Revenue contended that credit of ?5,62,949/- was not admissible due to transfer of one Auto Coner to another unit, Guna Plant, in 2001-02.

2. The appellant argued that they did not avail full 50% credit on capital goods in the first year, and the subsequent credit availed in 2002-03 should be considered as 100% credit of the remaining Auto Coner in Baddi Plant. They presented a certificate from a Chartered Accountant showing Cenvat credit balance from 2001-02 to 2011-2012.

3. The Revenue referenced Rule 4(2)(b) and case laws to support their contention that after taking credit in the first year, the appellants could not take credit again in the subsequent year as only one Auto Coner remained in Baddi Plant.

4. The Tribunal found that the appellants had availed 50% credit on both Auto Coners in 2001-02 and transferred one to Guna Plant in the same year. Despite this, they took the remaining 50% credit in 2002-03, which was not permissible under Rule 4(2)(a) of CCR. The Tribunal upheld the order of the Commissioner (Appeals) regarding the inadmissibility of the credit.

5. The Tribunal emphasized that the appellants' action of reversing 100% credit on one Auto Coner was against the provisions of Rule 4(2)(a) of CCR. The Tribunal cited relevant case laws and rules to support the decision that the credit of ?5,62,949/- was not allowable to the appellants.

6. The failure to disclose the transfer of one Auto Coner to Guna Plant, detected during audit, supported the sustainability of the penalty imposed by the Commissioner (Appeals). The Tribunal upheld the Commissioner's order, dismissing the appeal filed by the appellants.

This detailed analysis of the judgment highlights the issues, arguments presented by both sides, legal provisions cited, and the Tribunal's decision, providing a comprehensive understanding of the case.