2019 (12) TMI 784 - AT - Central Excise

CENVAT Credit - recovery of irregular credit belonging to another unit of the appellant alongwith interest and penalty - period 2013-14 and 2014-15 - whether the Appellant is required to again reverse the full amount of Cenvat credit on account of ineligibility of Cenvat credit availed by the Appellant during the period in which the reversal of Cenvat credit as per the procedure laid down Rule 6(3) (b) of the Cenvat Credit Rules, 2004 for proportionate reversal of Cenvat credit during the said period has already been done by the Appellant? HELD THAT - The Appellant has produced a CA certificate showing the reversals made for the FY 2014-15 on account of following the procedure as per Rule 6(3) of the Cenvat Credit Rules, 2004. Also a verification report as submitted by the Range office of the Appellant is placed on record which shows that the Appellant has actually reversed Cenvat credit following the said process for FY 2014-15 - From the above noted facts, it can be found that the Appellant cannot be asked to pay more than what it has actually availed. Appellant cannot be asked to reverse more than the actual Cenvat credit availed by the Appellant and based on the CA certificate and Range report there is no doubt as to the fact that the Appellant has actually followed the process of proportionate reversal under Rule 6(3) of the Cenvat Credit Rules, 2004 - demand set aside. Penalty U/s 11A - HELD THAT - The disputed amount had been paid before the issuance of the show cause notice, and the entire amount was paid alongwith interest. Therefore, the payment of duty in the instant case should have been treated as payment of central excise duty under Section 11A (2B) of the Act and the show cause notice should not have been issued. Penalty u/s 11AC - HELD THAT - The Revenue has not been able to prove beyond reasonable doubt the presence of fraud, collusion, willful misstatement or suppression of facts on the part of the appellant. Therefore, imposition of penalty under Section 11AC of the Act is unwarranted. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Confirmation of demand of irregular Cenvat credit belonging to another unit
- Applicability of Rule 6(3)(b) of the Cenvat Credit Rules, 2004
- Imposition of penalty under Section 11AC of the Act

Confirmation of demand of irregular Cenvat credit belonging to another unit:
The appellant, engaged in the manufacture of Biscuits, appealed against the confirmation of demand of irregular Cenvat credit amounting to ?4,62,741 belonging to another unit for the period 2013-14 and 2014-15. The dispute arose from invoices raised by suppliers on the Orissa unit of the appellant under the West Bengal unit registration. The appellant contended that it followed the process of proportionate reversal of Cenvat credit under Rule 6(3)(b) of the Cenvat Credit Rules, 2004. The appellant had already reversed the maximum total credits for FY 2014-15 and contended that any further reversal cannot exceed the remaining amount after the initial reversal, which was done with interest. For FY 2013-14, the appellant had already reversed the total amount with interest. The Tribunal examined the appellant's compliance with the reversal process and held that the appellant cannot be asked to pay more than the availed Cenvat credit. Referring to a previous decision, the Tribunal emphasized that Rule 6 aims to prevent availing Cenvat credit for exempted goods, not to extract illegal amounts from the assessee. Therefore, the demand was set aside based on the appellant's adherence to the reversal procedure.

Applicability of Rule 6(3)(b) of the Cenvat Credit Rules, 2004:
The Tribunal analyzed the appellant's compliance with Rule 6(3)(b) of the Cenvat Credit Rules, 2004, which pertains to the proportionate reversal of Cenvat credit. The appellant provided a CA certificate and a verification report from the Range office demonstrating the reversal of Cenvat credit for FY 2014-15 as per the prescribed procedure. Relying on the evidence presented, the Tribunal concluded that the appellant had indeed followed the process of proportionate reversal under Rule 6(3) of the Cenvat Credit Rules, 2004. The Tribunal's decision was guided by the principle that an assessee should not be required to reverse more than the actual Cenvat credit availed, ensuring compliance with the legislative intent behind Rule 6.

Imposition of penalty under Section 11AC of the Act:
Regarding the imposition of penalty under Section 11AC of the Act, the Tribunal noted that the disputed amount had been paid before the issuance of the show cause notice, with the entire amount paid along with interest. Therefore, the Tribunal considered the payment of duty as equivalent to payment of central excise duty under Section 11A (2B) of the Act, suggesting that the show cause notice should not have been issued. Additionally, the Tribunal found no conclusive evidence of fraud, collusion, willful misstatement, or suppression of facts by the appellant. Consequently, the Tribunal deemed the imposition of penalty under Section 11AC unwarranted, leading to the allowance of the appellant's appeal.

Overall, the Tribunal ruled in favor of the appellant, setting aside the demand for irregular Cenvat credit and rejecting the imposition of penalty under Section 11AC of the Act based on the appellant's compliance with the reversal process and lack of evidence supporting penalty imposition.