2021 (5) TMI 849 - AT - Central Excise

CENVAT Credit - capital goods - capital goods were not received into the factory - Penalty - HELD THAT - On perusal of the final order dated 20-5-2011, the Tribunal has directed officers to visit the assessee s factory and satisfy themselves as to the availability of the Spectrometer in question. After such verification, it is seen noted in the de novo adjudication order that the capital goods were present in the factory. Thus the allegations raised in the Show Cause Notice that the capital goods were not received in the factory and that the credit availed is wrong is without any factual basis. Further, it can also be seen that the appellant had challenged before the Tribunal the allegation of wrong availment of credit and submitted only that they would not be seeking re-credit of the same for the reason that they had already surrendered the registration of the factory. The authorities below have confirmed the interest on the basis that the appellant has not challenged the demand of wrongfully availed credit. The allegation in the Show Cause Notice is that the assessee did not bring the machine into the factory and suppressed the purchase and receipt of the machine in their factory for which the Show Cause Notice was issued. This allegation is now proved to be wrong after the verification by the Range Officer. In such circumstances, allegation of wrong availment of credit cannot sustain and therefore, the interest thereon also would not sustain. The penalty has already been set aside by the authorities below. The demand of interest by the department alleging wrong availment of credit cannot sustain - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Alleged wrongful availment of credit on capital goods not received in the factory, confirmation of demand of interest, imposition of penalty, challenge before Tribunal, verification of capital goods' presence in the factory.

Analysis:
The case involved a dispute regarding the alleged wrongful availment of credit on capital goods not received in the factory. The appellants were issued a Show Cause Notice, leading to a series of adjudications. The original authority confirmed the reversal of wrongfully availed credit, demanded interest, and imposed a penalty. The Commissioner (Appeals) upheld the liability to pay interest, leading the appellant to appeal before the Tribunal.

During the proceedings, the appellant's counsel argued that the capital goods in question were indeed received in the factory but were temporarily taken out for repair, leading to the issuance of the Show Cause Notice. The Tribunal, in its Final Order, directed verification of the presence of the spectrometer in the factory. Subsequent verification by the Range Officer confirmed the presence of the capital goods.

The department contended that the credit availed during the disputed period was incorrect as the capital goods were not in the factory. However, the Tribunal's direction for verification and the subsequent report contradicted this claim. The appellant had challenged the wrongful availment of credit and opted not to seek re-credit due to surrendering the factory's registration.

Upon careful consideration, the Tribunal found that the allegations in the Show Cause Notice were baseless as the capital goods were indeed present in the factory. The appellant's decision not to seek re-credit did not make the initial credit wrongful. The Tribunal held that the demand of interest based on the alleged wrongful credit could not be sustained and set aside the impugned order, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand of interest and emphasizing that the allegations of wrongful credit must be substantiated. The verification confirmed the presence of the capital goods, leading to the dismissal of the allegations and the appeal being allowed.