2018 (2) TMI 390 - AT - Central Excise

CENVAT credit - it appeared to the officers that the said scrap was non-cenvatable - Held that - there is no allegation that the scrap was non-duty paid nor there was any allegation that the inputs were not received factory in the factory - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Admissibility of Cenvat Credit on scrap purchased from a registered dealer.
2. Validity of show cause notice based on presumption.
3. Reduction of penalty under Section 11AC by the Appellate Authority.

Analysis:
1. The appeals arose from a common Order-in-Appeal passed by the Commissioner (Appeals) Customs and Central Excise, Meerut II, involving the admissibility of Cenvat Credit amounting to ?6,26,062 availed by the manufacturer assessee on scrap purchased from a registered dealer. The issue was whether the Cenvat Credit was admissible as the officers alleged the scrap to be non-cenvatable. The Commissioner (Appeals) confirmed the demand but reduced the penalty to ?2 lakhs. The manufacturer appellant argued that they had duty paying documents and relied on a ruling by the Hon'ble High Court of Allahabad to support their case.

2. The manufacturer appellant contended that the show cause notice was based on a presumption that the scrap was non-cenvatable, which they argued was not sustainable. They cited the ruling by the Hon'ble High Court of Allahabad in the case of Juhi Alloys Ltd., which held that if the assessee acted with reasonable diligence in dealing with the first stage dealer, their responsibility was discharged under Rule 9(3) of the Cenvat Credit Rules, 2004. The appellant emphasized that they had invoices issued by the registered dealer to support the availing of Cenvat Credit.

3. The Appellate Tribunal considered the arguments presented and found no allegation that the scrap was non-duty paid or that the inputs were not received in the factory. Relying on the ruling by the Hon'ble High Court of Allahabad, the Tribunal allowed the appeal filed by the appellant assessee and dismissed the appeal filed by the Revenue. It was noted that the show cause notice was not sustainable, leading to the decision in favor of the appellant. The Tribunal also mentioned that the penalty imposed under Section 11AC could not be reduced by the Appellate Authority, addressing the issue raised by the learned AR. The cross objection was also disposed of in the judgment.