2017 (11) TMI 1478 - AT - Central Excise

Area Based exemption - N/N. 56/2002-CE dated 14.11.2002 - substantial expansion - The department proceeded to deny the Cenvat credit availed by the appellant amounting to ₹ 2,19,69,001/- on goods procured from M/s Ritzy Polymers which were cleared availing the benefit of N/N. 1/2010 - Held that - availment under N/N. 1/2010 is in dispute which is yet to be settled. However, the alternate plea that they would have been entitled to N/N. 56/2002 upto 05.09.2014 appears to have been considered and permitted by the jurisdictional Central Excise authorities. If that is so, then there will be no justification to deny the Cenvat credit availed by the appellant on goods received from M/s Ritzy Polymers - matter remanded for verifying whether M/s Ritzy Polymers have been permitted to avail benefit of N/N. 56/2002 during the period under dispute. Penalty - CENVAT credit in respect of goods found short at the time of stock verification - Held that - the disputed amount stands paid by the appellant even before issue of SCN - there is no justification to impose penalty which is set-aside. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Denial of Cenvat credit availed by the appellant on goods procured from a supplier availing area based exemption under Notification No.1/2010.
2. Reversal of Cenvat credit for shortage of stock during verification.

Analysis:

Issue 1: Denial of Cenvat Credit:
The appellant, engaged in manufacturing PVC compounds, availed Cenvat credit on goods procured from a supplier, M/s Ritzy Polymers, who claimed the benefit of area based exemption under Notification No.56/2002 initially and later under Notification No.1/2010. The department denied the Cenvat credit amounting to ?2,19,69,001/- on goods procured from M/s Ritzy Polymers under Notification No.1/2010. The appellant argued that even without the benefit of Notification No.1/2010, M/s Ritzy Polymers could continue under Notification No.56/2002, entitling the appellant to Cenvat credit. The Tribunal noted that the dispute regarding M/s Ritzy Polymers' exemption claim under Notification No.1/2010 was pending, but the jurisdictional authorities had permitted them to avail the benefit of Notification No.56/2002 until 05.09.2014. Consequently, the Tribunal set aside the impugned order and remanded the matter to verify if M/s Ritzy Polymers were allowed to avail the benefit of Notification No.56/2002 during the disputed period.

Issue 2: Reversal of Cenvat Credit for Stock Shortage:
The appellant did not contest the reversal of Cenvat credit amounting to ?4,18,839/- due to goods found short during stock verification. The appellant had already paid this amount promptly. The Tribunal acknowledged that the disputed amount had been paid before the issuance of the Show Cause Notice (SCN). Therefore, the Tribunal found no justification to impose a penalty and set it aside. Ultimately, the Tribunal partially allowed the appeal by setting aside the demand of ?2,19,69,001/- and remanding the matter for a fresh decision while upholding the demand of ?4,18,839/- but setting aside the penalty.

In conclusion, the Tribunal's decision addressed the denial of Cenvat credit and the reversal of credit for stock shortage, emphasizing the importance of verifying the supplier's entitlement to the claimed exemptions and the prompt payment of disputed amounts.