2019 (2) TMI 1224 - AT - Central Excise

CENVAT Credit - duty paying invoices - invoices issued by 100% EOU as per the formula prescribed in Rule 3(7) of Cenvat Credit Rules, 2004 - Held that - here is an apparent error in applying the formula - the demand quantified in the SCN appears to be prima facie incorrect. The lower authority submits that the judgments relied upon the by the appellant only by saying that facts are different, however, nothing was discussed how the facts in the relied upon judgments and of this case are different - matter needs reconsideration - appeal allowed by way of remand.

Summary

Issues:
Whether the appellant correctly availed the cenvat credit on invoices issued by 100% EOU as per Rule 3(7) of Cenvat Credit Rules, 2004.

Analysis:
The appellant contended that the formula applied by the department in issuing the show cause notice (SCN) was incorrect, leading to a demand of ? 21,19,058. However, they argued that if the correct formula was applied, the demand would be limited to ? 3,79,645. Discrepancies in applying the formula were highlighted, supported by references to various judgments such as Jindal Saw Ltd, Metaclad Ind., Vivacity Woven Sacks, SV. Sales Corp., and Micro Labs Ltd.

The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order, maintaining the department's stance.

Upon careful consideration of submissions and records, it was observed that errors existed in applying the formula. The issues identified included incorrect reporting of credits, wrong adoption of duty rates, and overlooking certain components in the duty calculation. The demand quantified in the SCN was deemed prima facie incorrect. The lower authority's argument that the facts in relied-upon judgments were different was found lacking in detailed discussion. Consequently, the impugned order was set aside, and the matter was remanded to the adjudicating authority for reconsideration. Other issues like limitation, penalty, and employee penalties were left open for further consideration.

In conclusion, the judgment highlighted discrepancies in the application of the formula for cenvat credit, leading to the setting aside of the impugned order and a remand for reevaluation by the adjudicating authority. The decision emphasized the need for a thorough review of facts and correct application of legal principles in such matters.