2022 (10) TMI 514 - AT - Central Excise

Wrongful availment of CENVAT Credit - manufacture of Emulsion Matrix (bulk explosive) - It is submitted that the disputed goods had been used for the purposes of manufacturing of BMD Vehicles and the Storage Tanks, without which, the Bulk Explosive cannot be prepared - period January, 2013 to December, 2013 - HELD THAT - The ld.Adjudicating Authority has relied upon the Larger Bench decision of the Tribunal in the case of VANDANA GLOBAL LTD. VERSUS CCE 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) for dis-allowance of cenvat credit as claimed by the Appellant, which is not at all applicable to the facts of the present case. Further the Hon ble Chhattisgarh High Court in M/S VANDANA GLOBAL LIMITED AND OTHERS VERSUS COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, CENTRAL EXCISE 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT has distinguished the decision of the Larger Bench of the Tribunal on the findings that it is not a good law and various other High Courts have also expressed similar views. By respectfully following the decision of the Hon ble Chhattisgarh High Court, the impugned demand cannot sustain and accordingly, the same is set aside - appeal allowed.

Summary

Issues:
1. Disallowance of cenvat credit on raw materials used for manufacturing explosives.
2. Lack of evidence regarding the use of goods for claiming credit.
3. Application of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
1. The appeal involved the disallowance of cenvat credit on raw materials used for manufacturing "Emulsion Matrix (bulk explosive)." The Appellant, a supplier of bulk explosives, used various raw materials and special machinery for production. The dispute arose from a show-cause notice alleging wrongful cenvat credit availment during a specific period. The Adjudicating Authority questioned the use of goods for claiming credit and relied on a Tribunal's decision for disallowing the credit and imposing a penalty. However, the Tribunal, after hearing both sides, found the Authority's reliance on the previous decision to be inapplicable to the present case. The Tribunal referred to a High Court decision that distinguished the Tribunal's earlier ruling, leading to the setting aside of the demand for disallowance of cenvat credit.

2. The lack of evidence regarding the use of goods for claiming credit was a crucial issue in the case. The Adjudicating Authority emphasized the absence of corroborated evidence supporting the use of goods for qualifying as components, spares, or accessories under relevant provisions. The Authority's decision to disallow the credit and impose a penalty was based on this lack of evidence. However, the Tribunal, upon review, found the Authority's approach flawed and not applicable to the facts of the case. By following a High Court decision that criticized the Tribunal's earlier ruling, the Tribunal set aside the demand for disallowance of cenvat credit.

3. The application of a penalty under Section 11AC of the Central Excise Act, 1944 was a significant aspect of the case. The Adjudicating Authority had imposed a penalty along with disallowing the cenvat credit, which was later set aside by the Commissioner (Appeals). The Tribunal, upon hearing the appeal, allowed it with consequential relief as per the law, thereby indicating a favorable outcome for the Appellant regarding the penalty issue.

This detailed analysis of the judgment highlights the key issues related to the disallowance of cenvat credit, lack of evidence for claiming credit, and the application of penalties under the Central Excise Act, 1944. The Tribunal's decision to set aside the demand for disallowance of cenvat credit and allow the appeal with consequential relief showcases a thorough examination of the legal aspects involved in the case.