2007 (12) TMI 140 - AT - Central Excise

Inputs procured domestically and by import imported parts and spares were sold as such not used in manufacture credit denied of CVD availed on the goods imported on ground that these goods were sold as such in India without using them in manufacturing - Duty paid at time of clearance should be treated as reversal of the alleged ineligible credit demand interest and penalty is not maintainable but credit on goods sent to job-worker not returned in180 days is required to be reversed

Issues involved:
Appeal against demand under Cenvat Credit Rules, 2004 and Central Excise Act, 1944; Denial of credit on imported goods sold as such; Penalty imposition; Recovery of interest; Inventory control system for imported goods; Separate premises for selling imported goods; Utilization of credit for payment of duty; Reversal of credit on inputs not received within stipulated period; Imposition of penalty; Demand of interest.

Detailed Analysis:

1. Appeal against demand under Cenvat Credit Rules, 2004 and Central Excise Act, 1944:
The appeal was filed against the Order-in-Original confirming a demand of Rs. 6,72,27,080/- under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The Commissioner also imposed a penalty and ordered the recovery of interest on the duty amount. The appellants challenged these demands.

2. Denial of credit on imported goods sold as such:
The Central Excise Department issued a show cause notice proposing to deny credit on imported goods sold as such in India, alleging that these goods were not used in the manufacturing process. The appellants argued that since duty was collected on these goods at the time of clearance, the Department cannot now deny the credit. They contended that the duty paid should be treated as a reversal of the alleged ineligible credit.

3. Penalty imposition and recovery of interest:
The Commissioner imposed a penalty of Rs. 6,72,27,080/- under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. Additionally, interest on the duty amount was ordered. The Tribunal found the imposition of the penalty unwarranted and set it aside. The demand for interest on a specific amount was also deemed unsustainable and set aside.

4. Inventory control system for imported goods and separate premises for selling imported goods:
The appellants did not have a separate inventory control system for imported goods used in production and those sold as such. They later obtained separate registrations for selling imported goods at different premises. The Tribunal considered these factors in the context of the case.

5. Utilization of credit for payment of duty:
The appellants argued that the duty paid on imported goods sold as such should be considered as a reversal of the credit availed on those goods. They cited legal precedents to support their claim, emphasizing that if no duty was payable on the sale of imported goods, the duty paid should be treated as a reversal of the Cenvat credit.

6. Reversal of credit on inputs not received within stipulated period:
The Tribunal held that the reversal of credit on inputs lying in stock as on a specific date was not required as the inputs were not sold. However, if these inputs are cleared for sale, the credit must be reversed. The reversal of credit on inputs sent for processing but not received within the stipulated period was deemed appropriate.

7. Conclusion:
The Tribunal set aside the demand for a specific amount, modified the Commissioner's order on various aspects, and disposed of the appeal accordingly. The imposition of the penalty was deemed unwarranted, and the demand for interest was set aside. The decision was pronounced in court, bringing closure to the legal proceedings.

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