2019 (7) TMI 1257 - AT - Central Excise

Non reversal of CENVAT credit - Benefit of N/N. 01/2011 CE dated 01.03.2011 and 12/2012 CE dated 17.03.2012 (Serial No. 128) - CENVAT Credit on inputs not available - HELD THAT - It is an admitted and apparent fact on record that for availing the benefit of Notification No. 01/2011 CE dated 01.03.2011 and under Notification No. 12/2012 CE dated 17.03.2012 (Serial No. 128), the assessee is not allowed to avail the cenvat credit on the capital goods. Admittedly, the appellant has availed the cenvat credit on capital goods and admittedly the final product of appellant is only Single Super Phosphate , a fertilizer (the exempted good). Since it is a statutory mandate it was incumbent for the appellant to reverse the cenvat credit as was prior availed on the capital goods used in manufacture of exempted goods on which the benefit of lesser duty vide the impugned Notification was subsequently availed. Admittedly, there is no such book entry to reverse the remaining amount as well. Admittedly, no subsequent return has been filed by the appellant to reverse the balance amount of the cenvat credit which as per him is still lying unutilised. Penalty - HELD THAT - The question of imposition of penalty also does not arise when admittedly the amount of cenvat credit availed is lying unutilised till date in the assessee s/ appellant s account. Appeal allowed in part.

Summary

Issues:
- Availment of cenvat credit on capital goods for manufacturing an exempted product under specific notifications.
- Reversal of cenvat credit upon objection by the Department.
- Disallowance of cenvat credit and imposition of interest and penalty.
- Applicability of statutory mandate for reversal of cenvat credit.
- Partial reversal of cenvat credit and unutilized balance amount.
- Justification of demand confirmation and modification of the order.

Analysis:

The appellant, engaged in manufacturing a fertilizer under specified notifications, availed cenvat credit on capital goods used in producing the exempted product. Upon Department scrutiny, objection was raised regarding the cenvat credit availed. A show cause notice was issued proposing disallowance of the credit, recovery of interest, and imposition of penalty. The initial proposal was confirmed, leading to the appellant's appeal before the Tribunal.

During the hearing, the appellant argued that the credit was availed before the exemption and a partial amount was paid back upon objection. The remaining balance was stated to be unutilized, requesting restoration of credit. Citing relevant case laws, the appellant sought the reversal of penalty and interest.

In response, the Department contended that the exemption condition was non-availment of cenvat credit, which was violated by the appellant's prior credit availing. The Department emphasized that partial reversal does not equate to complete reversal and unutilized credit does not automatically reverse. The Department urged dismissal of the appeal.

After reviewing the arguments and records, the Tribunal noted the statutory mandate against availing cenvat credit on capital goods for exempted products. Despite a partial reversal upon objection, the appellant failed to reverse the entire availed amount. The Tribunal found no infirmity in the order regarding the contravention of Cenvat Credit Rules. However, considering the partial reversal, the demand confirmation was modified to sustain only for the reversed amount. Relying on pertinent case laws, the Tribunal ruled against imposing interest and penalty due to the unutilized credit. The order was accordingly modified, partially allowing the appeal.