2007 (12) TMI 86 - AT - Central Excise

Wrong availment of credit - inputs (fitments) were cleared as such without reversing credit appellant paid duty on higher value (including value of fitments) at the time of clearance of engines(without fitments) subsequently cleared fitments without paying duty clearance of these fitments will not be considered as part of engines but will be considered removal of inputs as such - appellants is not permitted to set off the duty earlier paid in excess, against subsequent clearances

Summary

Issues: Duty demand based on wrongful availment of Cenvat credit, contravention of Rule 3(5) of Cenvat Credit Rules, 2004.

The judgment by the Appellate Tribunal CESTAT, Mumbai, involved a duty demand of Rs.4,39,187/- confirmed on the appellants for wrongly availing Cenvat credit in violation of Rule 3(5) of the Cenvat Credit Rules, 2004. The appellants had cleared inputs without reversing the credit, leading to the demand. The Tribunal noted the appellants' argument that since they paid duty on a higher value at the time of clearance of IC diesel engines without fitments and later cleared the fitments separately, no reversal of credit was necessary. However, the Tribunal held that under Central Excise law, duty liability arises upon goods' removal from the factory, making the clearance of fitments a clearance of inputs as such, necessitating the reversal of Cenvat credit. The Tribunal cited a previous order in TELCO Ltd. v. CCE, Pune, where it was established that duty paid in excess cannot be set off against subsequent clearances. Despite no appeal by the Revenue against dropping the duty demand, the Tribunal upheld the requirement to reverse the credit, following the precedent set by the earlier order. Therefore, the impugned order was upheld, and the appeal was rejected. The judgment was pronounced on 3-12-2007.