2019 (6) TMI 262 - AT - Central Excise

CENVAT credit - inputs - credit availed on inputs without actual use in manufacture - Revenue Neutrality - penalty - HELD THAT - It is not in dispute that the Appellant did not undertake any manufacturing activity on goods on which the credit was availed by them. The partners of the firm and the employees have themselves accepted the fact that no activity was undertaken by them. In such circumstances no credit is allowable to the Appellant. Penalty - Revenue Neutrality - HELD THAT - Since the Appellant has paid more duty than cenvat availed and the situation being revenue neutral, the demand of cenvat credit is not sustainable - the penalty imposed against the main Appellant M/s San Industries and the co-appellants is also not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of cenvat credit on inputs without actual use in manufacture; Allegation of fictitious sale and transportation of goods; Imposition of penalty on Appellants.

Analysis:
1. The present appeals were filed against an Order-in-Original alleging that the Appellant availed credit on inputs without actual use in manufacture. The Appellant, registered for manufacturing Speciality Oil, faced accusations of fictitious sale and unauthorized transportation of goods. The adjudicating authority confirmed the demand of cenvat credit and imposed penalties on the Appellants.

2. The Appellants argued that they paid an excess duty of &8377; 6,46,068/-, making the situation revenue neutral. They contended that even if no manufacturing activity occurred, since duty was paid, the cenvat credit cannot be denied. The Appellants cited various judgments and tribunal orders to support their stance, emphasizing that the duty paid exceeded the cenvat credit availed, aligning with Rule 16 of Cenvat Credit Rules, 2004.

3. The Revenue contended that cenvat credit should be recovered as the goods were not used in manufacture, supporting the findings of the impugned order. However, the Tribunal found that while no manufacturing activity took place, the Appellant paid central excise duty upon clearance of final products, resulting in a revenue-neutral scenario. The duty paid exceeded the cenvat credit availed, rendering the demand for cenvat credit unsustainable.

4. Relying on precedents and legal provisions, the Tribunal held that since the duty paid surpassed the cenvat credit availed, the demand for cenvat credit and the penalties imposed were unsustainable. Consequently, the impugned orders were set aside, and all appeals were allowed with any consequential reliefs.

This comprehensive analysis highlights the key arguments, legal interpretations, and the final decision in the Appellate Tribunal's judgment, addressing the issues raised in the case effectively.