2018 (7) TMI 1054 - AT - Central Excise

CENVAT Credit - duty paying documents - Debit Notes - Rule 9 of Cenvat Credit Rules, 2004 - Held that - The Debit Note contains all the details as required for availment of credit. Further, the copies of Debit Notes have also been placed on record and in the Debit Notes the assessee has mentioned the Invoice No. by which the goods were originally sent by the appellant relates to and therefore it can easily be ascertained that the goods received by the assessee is the same as was originally sent - further, the original authority as well as Commissioner (Appeals) who has upheld the Order-in-Original has traveled beyond the SCN inasmuch as there was no allegation in the SCN that the goods are not returned back to the factory. The only allegation in the show-cause notice is that Debit Note is not a valid document as per Rule 9 of CCR - credit cannot be denied on this count. CENVAT Credit - common input services used in the factory and dealership unit without maintaining separate records - Rule 6(3) of CCR - Held that - Tribunal in the case of HCL Infosystem Ltd. 2014 (7) TMI 76 - CESTAT NEW DELHI has held that trading was an exempted service even prior to 01.04.2011 and therefore by following the ratio of the decision, the CENVAT credit availed on common input services relating to trading activity is required to be reversed by the appellant proportionately and therefore this issue is decided against the assessee - credit not allowed - also it is held that the demand is not barred by limitation. CENVAT Credit - sales rejects under Rules 16 - goods returned from EOU - it was alleged that appellant did not repair or return the goods and stored them as scrap - Held that - Since the goods are lying with the appellant and as and when the appellant would clear those goods then he will pay the requisite Excise duty - demand at this stage not sustainable - further, it is a settled position that the charging of duty by supplier cannot be questioned at the recipient end - demand set aside. Appeal allowed in part.

Summary

Issues:
- Wrongly availed cenvat credit on debit notes
- Availed cenvat credit on common input services without separate records
- Availed cenvat credit on sales rejects stored as scrap

Analysis:
The appeal was against an order confirming a demand for wrongly availed cenvat credit. The appellant, engaged in manufacturing Tapping Adapters and Chucks, was alleged to have availed credit in contravention of Cenvat Credit Rules. The original authority confirmed a total demand of ?3,59,383 along with interest and penalties. The appellant contended that the impugned order failed to consider factual and legal positions, citing various tribunal decisions in support. The appellant argued that the credit availed on goods returned under Debit Notes was valid under Rule 16 of Central Excise Rules 2002, emphasizing the details provided in the Debit Notes. Additionally, the appellant challenged the demand for reversal of common input services credit related to trading activity, claiming trading was not an exempted service pre-2011.

The AR defended the impugned order, arguing that the Debit Notes did not meet Rule 9 requirements for credit availment. The AR contended that the credit on common input services for trading was not legal, citing tribunal and high court decisions. Regarding the credit on goods returned by EOU, the AR argued that the appellant did not follow the prescribed procedure, leading to the storage of rejected goods as scrap without reversal. The AR supported the invocation of the extended period due to the appellant's failure to disclose trading activities, justifying the demand.

After considering submissions, the judge found the Debit Notes contained necessary details for credit availment, ruling in favor of the appellant on the scrap-related demand. However, the judge upheld the demand on common input services credit related to trading activity, citing previous decisions. The judge also ruled against the appellant on the credit availed on goods returned by EOU, emphasizing the duty payment requirement upon clearance. The judge rejected the limitation defense, citing relevant court and tribunal decisions. Ultimately, the appeal was partly allowed, dropping the demand related to scrap and goods returned by EOU but upholding the demand for wrongly availed credit on common input services related to trading activity.