2018 (7) TMI 774 - AT - Central Excise

CENVAT credit - registered dealer - invocation of Rule 14 of CER - Held that - Rule 14 of the Cenvat Credit Rules, 2004 deals with the provisions for recovery of wrongly availed CENVAT Credit. The said statutory provisions mandate that where the CENVAT Credit has been taken or utilized wrongly, the same along with interest shall be recovered from the manufacturer or provider of the output service. On reading of the said statutory provisions, it transpires that proceedings can only be initiated against the manufacturer or the service provider - In this case, the appellant No.1 is not confirming to either of the persons/entity mentioned in the said rule - provisions of Rule 14 ibid cannot be invoked for denial of CENVAT Credit to the appellants. Confiscation u/s 119 of the Customs Act, 1962 - redemption fine - Held that - It is not the case of Revenue that the appellant had used any other goods to conceal the offending goods i.e. scrap in pressed bundle or loose scraps . Thus, confiscation of goods under Section 119 ibid is not proper and justified - redemption fine also not warranted. Penalty u/r 26 of CER - Held that - The provisions of Rule 26 of the Central Excise Rules, 2002 are applicable in case of both the appellants herein for imposition of penalty inasmuch as wrong invoices were issued by them, facilitating of availment of ineligible Cenvat benefit to the buyer of the goods - however, considering the fact that the buyer M/s. TFCWRL has not availed any credit based on the invoices issued by the appellants, the quantum of penalty is reduced. Appeal allowed in part.

Summary

Issues:
1. Denial of CENVAT Credit under Rule 14 of the Cenvat Credit Rules, 2004.
2. Confiscation of goods under Section 119 of the Customs Act, 1962.
3. Imposition of penalties under Rule 26 of the Central Excise Rules, 2002.

Detailed Analysis:
1. The issue of denial of CENVAT Credit under Rule 14 of the Cenvat Credit Rules, 2004 was considered in the case. The Tribunal noted that Rule 14 mandates the recovery of wrongly availed CENVAT Credit from the manufacturer or service provider. However, in this case, the appellant was not falling under either category mentioned in the rule. Therefore, the Tribunal concluded that Rule 14 cannot be invoked for denying CENVAT Credit to the appellants. Consequently, the impugned order upholding the denial of CENVAT Credit was set aside.

2. Regarding the confiscation of goods under Section 119 of the Customs Act, 1962, the Tribunal analyzed that this provision allows confiscation of smuggled goods when other goods are used to conceal them. Since it was not established that the appellant had used any other goods to hide the offending goods, i.e., scrap, the confiscation under Section 119 was deemed improper. Consequently, the imposition of redemption fine was also invalidated. The Tribunal held that the confiscation and fine were not justified based on the circumstances presented.

3. The issue of imposing penalties under Rule 26 of the Central Excise Rules, 2002 was also addressed in the judgment. The Tribunal acknowledged that the appellants had issued incorrect invoices that facilitated the buyer to avail ineligible CENVAT benefits. However, considering that the buyer had not utilized any credit based on the appellants' invoices, the Tribunal decided to reduce the penalties imposed on the appellants in the interest of justice. Therefore, the penalties initially set at &8377; 1,50,248 each were reduced to &8377; 50,000 each. The Tribunal justified this reduction by emphasizing the buyer's lack of benefit from the incorrect invoices issued by the appellants.

In conclusion, the Tribunal disposed of the appeals by setting aside the denial of CENVAT Credit and the imposition of redemption fine while reducing the penalties imposed on the appellants under Rule 26 of the Central Excise Rules, 2002.