2022 (10) TMI 957 - AT - Central Excise

Wrongful availment of CENVAT Credit - recovery of credit alongwith interest and penalty - import of non alloy copper coated wire of M.S/non alloy solid wire/welding wire and are carrying out processes like cutting, rewinding, branding, testing and repacking - process amounting of manufacture or not - HELD THAT - A part of the imported goods has been used for manufacture of the goods cleared on payment of duty and duly reflected in the ER-1 returns filed. The remaining imported goods which were available in stock as such or contained in finished goods have been allowed to be traded by the Revenue. A detailed calculation needs to be made by the lower authorities to determine how much of the credit amounting to Rs.3,08,58,313/- pertained to the inputs which were used by the appellants for manufacture and clearance of the dutiable goods. To that extent, the amount reversed needs to be restored to the appellants. For the purpose of this computation, the matter needs to be remanded back to the original authority. It is made clear that Section 142(3) of the CGST Act has to be followed strictly. The concerned officer should consider granting cash refund of any amount due to the appellants - the appeals are partly allowed and the matter remanded back to the original authority.

Issues Involved:
1. Wrongly availed Cenvat credit.
2. Appropriation of reversed Cenvat credit.
3. Recovery of interest on the demanded amount.
4. Imposition of penalty on the appellant.
5. Liability and non-confiscation of goods.
6. Penalty on the Executive Director.

Detailed Analysis:

1. Wrongly Availed Cenvat Credit:
The Commissioner confirmed the demand for wrongly availed Cenvat credit amounting to Rs. 4,02,49,979/- under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A(1) of the Central Excise Act, 1944. The issue arose because the processes carried out by the appellant (cutting, rewinding, branding, testing, and repacking) did not amount to manufacture, making the Cenvat credit inadmissible. The Tribunal referred to the case of Ajinkya Enterprises, where it was held that once duty on the final products is accepted by the department, Cenvat credit availed need not be reversed even if the activity does not amount to manufacture. Hence, the Tribunal set aside the demand for Cenvat credit recovery for processed goods cleared on payment of duty.

2. Appropriation of Reversed Cenvat Credit:
The Commissioner ordered the appropriation of Rs. 3,08,58,313/- already reversed by the appellant. The Tribunal noted that a detailed calculation was needed to determine how much of the credit pertained to inputs used for manufacturing dutiable goods. The matter was remanded back to the original authority to compute the correct amount and restore the reversed credit to the appellants.

3. Recovery of Interest:
Interest on the confirmed demand amount was ordered to be recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944. The Tribunal did not specifically address this issue separately but implied that interest recovery would be aligned with the final determination of the correct Cenvat credit.

4. Imposition of Penalty on the Appellant:
A penalty of Rs. 4,02,49,979/- was imposed under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The Tribunal, following the Ajinkya Enterprises case, indicated that since the demand for Cenvat credit recovery was set aside, the penalty linked to it was also not justified.

5. Liability and Non-Confiscation of Goods:
The Commissioner did not order the confiscation of goods on which Cenvat credit was wrongly taken, as they were not available for seizure. The Tribunal did not alter this part of the order, implicitly agreeing with the Commissioner's decision.

6. Penalty on the Executive Director:
A penalty of Rs. 50,000/- was imposed on the Executive Director under Rule 15(1) of the Cenvat Credit Rules, 2004. The Tribunal upheld the penalty, noting that the Executive Director was aware of the Central Excise Law and Procedures and had deliberately availed wrong credit, thus justifying the penalty.

Conclusion:
The Tribunal partly allowed the appeals, setting aside the demand for Cenvat credit recovery for processed goods cleared on payment of duty and remanding the matter back to the original authority for detailed calculation and restoration of the reversed credit. The penalty on the Executive Director was upheld. The original authority was directed to decide the matter within three months.

← Previous Next →