2019 (1) TMI 821 - HC - Central Excise

Wrongful availment of CENVAT Credit - input - Linear Alkyl Benzene (LAB) - It was alleged that LAB was not at all utilized as input in the final product, and therefore, the assessee wrongly availed the Cenvat credit of duty paid on such input i.e. LAB - Held that - It is required to be noted that as such the matter was remanded to the learned Commissioner (Appeals) for the very purpose by specifically observing that the onus is on the Department to prove that the assessee wrongly availed the Cenvat Credit on the tax paid on LAB, which was used in the input of the final product, and therefore, unless and until the Department was able to prove that in the final product the LAB was not used/utilized at all, the Department was not justified in holding that the assessee wrongly availed the Cenvat Credit on LAB. So far as some of the statement is concerned, which are relied upon by the original adjudicating authority while passing the impugned order, the Learned Commissioner (Appeals) specifically observed that they are restricted statement, and therefore, the same could not have been relied upon. Appeal dismissed - decided against appellant-Revenue.

Issues:
1. Wrong availment of Cenvat Credit on Linear Alkyl Benzene (LAB) by a company.
2. Failure to prove that LAB was not used as input in the final product.
3. Imposition of penalty on the company and its director without obtaining chemical test samples of final products.
4. Dispute regarding the justification of denying Cenvat Credit on LAB.

Analysis:
1. The judgment addresses the issue of wrong availment of Cenvat Credit on LAB by a company. The Commissioner (Appeals) remanded the matter to the adjudicating authority for further investigation to prove whether LAB was actually used in the final product. The Commissioner highlighted the importance of documentary evidence to establish the irregular availment of Cenvat credit. The onus was on the Department to provide proof of diversion of LAB by the company or dealer after claiming Cenvat credit.

2. The failure to prove that LAB was not used as an input in the final product led to the imposition of penalties on the company and its director. Despite not obtaining chemical test samples of the final products, the adjudicating authority confirmed the demand and penalties. The CESTAT later set aside the demand and penalties, emphasizing the Department's failure to establish that LAB was not utilized in the final product.

3. The judgment also discusses the imposition of penalties without obtaining chemical test samples of the final products. The Department argued that due to the lapse of time, obtaining such samples was not feasible. However, the Court noted that the onus was on the Department to prove the wrongful availment of Cenvat Credit on LAB, and without concrete evidence that LAB was not used in the final product, the penalties were unjustified.

4. The dispute regarding the justification of denying Cenvat Credit on LAB centered on the Department's failure to prove that the final product did not contain LAB. The Court agreed with the Tribunal's decision, stating that without conclusive evidence of non-utilization of LAB in the final product, denying Cenvat Credit was unwarranted. The judgment dismissed the Appeals, concluding that no substantial question of law arose in the case.

← Previous Next →