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2019 (5) TMI 1479 - AT - Central ExciseCENVAT Credit - inputs - crude menthol - It appeared to Revenue that provisions of Sub-rule (3) of Rule 11 of Cenvat Credit Rules, 2004 would be applicable as on 01.03.2008 and as a result, appellant were not eligible to avail Cenvat Credit of ₹ 95,51,299/- involved in the goods in-process and balance Cenvat Credit would lapse - Principles of natural justice - HELD THAT - The Original Authority has denied said Cenvat Credit for appellant having not informed the Department about the receipt of duty paid final products back into the factory where as there is no such requirement under said Rule 16. Further the burden of proof is on Revenue to establish that the duty paid goods returned to the factory are subjected to such processes which did not amount to manufacture to deny the Cenvat Credit. The directions of this Tribunal were to disallow such Cenvant Credit which has gone into final product which has been cleared to home consumption without payment of duty in view of said Notification No. 04/2008-CE dated 01.03.2008. The Original Authority did not establish any quantity of final product to have been cleared for home consumption without payment of duty. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Applicability of Rule 11(3) of Cenvat Credit Rules, 2004. 2. Denial of Cenvat Credit on goods in-process and stock. 3. Re-quantification of demand and penalty imposition. 4. Compliance with principles of natural justice. 5. Eligibility of Cenvat Credit on returned goods under Rule 16 of Central Excise Rules, 2002. Issue-wise Detailed Analysis: 1. Applicability of Rule 11(3) of Cenvat Credit Rules, 2004: The Tribunal examined the applicability of Rule 11(3) concerning the situation where some final products become exempt from excise duty while others remain dutiable. The Tribunal held that Rule 11(3) is applicable only if all final products manufactured from cenvated inputs become exempt from duty simultaneously. Since the appellant continued to produce dutiable products, Rule 11(3) was deemed inapplicable. The Tribunal emphasized that the provisions of Rule 11(3) must be harmoniously read with Rule 3(4), which allows Cenvat credit utilization for payment of any excise duty on any final product. 2. Denial of Cenvat Credit on Goods in-Process and Stock: The Tribunal clarified that Cenvat credit on inputs lying in stock or in process as of 01.03.2008 would be admissible only to the extent these inputs were used in the manufacture of dutiable final products. The credit would not be admissible for inputs used in the manufacture of exempted final products like Menthol Flakes and Menthol Crystals. The Tribunal directed the re-quantification of the demand based on the utilization of inputs for dutiable and exempted final products. 3. Re-quantification of Demand and Penalty Imposition: The Original Authority's order confirming the demand of ?1,07,94,175/- and imposing an equal penalty was challenged. The Tribunal found that the Original Authority did not comply with its earlier directions for re-quantification and failed to consider all evidence. The Tribunal set aside the impugned order and remanded the case for de-novo adjudication, directing the Original Authority to re-quantify the demand and impose penalties based on the revised calculations. 4. Compliance with Principles of Natural Justice: The Tribunal noted that the Original Authority violated the principles of natural justice by not providing the appellant with a copy of the verification report dated 18.02.2016 and not seeking their comments. Additionally, the Original Authority did not give the appellant an opportunity to produce necessary documents, such as the original RG-1, for verification of finished goods cleared for export. The Tribunal found these actions as non-compliance with its earlier directions and a breach of natural justice. 5. Eligibility of Cenvat Credit on Returned Goods under Rule 16 of Central Excise Rules, 2002: The Tribunal addressed the issue of Cenvat credit of ?7,68,608/- on returned goods. It held that under Rule 16, there is no requirement for the appellant to inform the Department about the receipt of duty-paid goods back into the factory. The burden of proof lies with the Revenue to establish that the returned goods were not subjected to processes amounting to manufacture. The Tribunal found the Original Authority's denial of Cenvat credit based on the appellant's non-intimation to the Department as unsustainable. Conclusion: The Tribunal set aside the impugned Order-in-Original and allowed the appeal, directing the Original Authority to re-quantify the demand and penalties in compliance with the Tribunal's observations and ensuring adherence to principles of natural justice.
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