2018 (2) TMI 547 - AT - Central Excise

CENVAT credit - duty paying documents - it was alleged that the main appellant is not entitled to avail Cenvat Credit on the basis of the invoices issued by the co-appellant - Held that - the main appellant has taken Cenvat Credit on the strength of invoice, which is a document a prescribed under Rule 9(2) of Cenvat Credit Rules, 2004 and having full particulars of the suppler of the goods. Therefore, in terms of Rule 3 of Cenvat Credit Rules, 2004, the main appellant is entitled to take Cenvat Credit - the Cenvat Credit cannot be denied to the main appellant - penalty also cannot be imposed. Penalty on co-appellant - Held that - the co-appellant has misinterpreted himself as the second stage dealer whereas the co-appellant has the third stage dealer but, the payment of duty has not been disputed. Therefore, penalty u/r 26 of the Central Excise Rules is not imposable on the co-appellant as ingredients of the said provisions are missing, but for the breach of misrepresentation has committed by the co-appellant, therefore, penalty u/r 27 of the Central Excise Rules, 2002 is imposable on co-appellant. Appeal allowed in part.

Summary

Issues:
Cenvat Credit denial and penalty imposition on main appellant, Cenvat Credit entitlement and penalty imposition on co-appellant.

Analysis:
The main appellant, a manufacturer of Bulk Drugs, was denied Cenvat Credit based on the allegation that the co-appellant misrepresented themselves as a second stage dealer instead of a third stage dealer. The main appellant argued that they were entitled to the credit as all required particulars were mentioned in the invoices per Rule 9(2) of Cenvat Credit Rules, 2004. They also contended that since the goods received were duty paid and cleared on payment of duty, the duty payment should be considered as a reversal of Cenvat credit. The Tribunal found in favor of the main appellant, stating that they were entitled to the credit as per Rule 3 of the Cenvat Credit Rules, 2004, and the duty payment amounted to reversal of credit, citing a decision of the Bombay High Court.

Regarding the co-appellant, it was argued that since the goods cleared were manufactured by the main appellant, they were entitled to the Cenvat Credit under Rule 16 of the CCR, 2004. The Tribunal agreed that the co-appellant was entitled to the credit but noted that the co-appellant misrepresented themselves, leading to a penalty under Rule 27 of the Central Excise Rules, 2002. As a result, a penalty of ?5000 was imposed on the co-appellant.

The Tribunal dismissed the appeals, ruling that the goods were not liable for confiscation, no demand of duty was sustainable against the main appellant, and no penalty was imposed on them. However, a penalty of ?5000 was confirmed on the co-appellant for misrepresentation, despite being entitled to the Cenvat Credit.