2023 (2) TMI 661 - AT - Central Excise

Recovery of wrongly availed and utilized CENVAT credit alongwith interest and penalty - Supply of HR Coils and other inputs - process amounting to manufacture or not - denial of CENVAT Credit on the ground that Rule 3 of the Cenvat Credit Rules CCR , 2004 provides for credit of duty of excise, but not the credit of an amount deposited under section 11D. HELD THAT - The appellant is a buyer of the materials and had paid the amount as duty of excise and not as an amount under section 11D. The goods have been correctly received and accounted for. If the Revenue was of the opinion that M/s Bhushan Steels had wrongly assessed its duty liability and paid certain amount as duty of excise when in fact the activities did not amount to manufacture at all, the officers who had jurisdiction over M/s Bhushan Steels should have examined this matter while assessing the returns filed by M/s Bhushan Steels and taken appropriate action. The officer who issued the SCN had jurisdiction over the appellant and not over M/s Bhushan Steels - the SCN itself was issued without any authority of law. No doubt, the SCN intends to recover the Cenvat credit availed by the appellant but the basis for such of recovery is the assertion that the activities of M/s Bhushan Steels, Ghaziabad, who had supplied the goods did not amount to manufacture. Deciding the amount of excise duty leviable and deciding whether the activities of an assessee amount to manufacture or otherwise and other related issues are matters of assessment. Such assessment can be done by the assessee itself (self-assessment under Rule 6 of Central Excise Rules, 2002) or by the Scrutinizing Officer who has jurisdiction for the assessee under Rule 12 (3) of the Central Excise Rules. Neither the appellant in this case who is the only the buyer of the goods nor the Assistant Commissioner who has jurisdiction over the appellant had any jurisdiction or right to change the assessment made by M/s Bhushan Steels - the entire SCN and the consequent orders need to be set aside. Nothing in the CCR, or the Central Excise Rules or the Act which places such an obligation on any assessee who is the buyer of the goods. The SCN and the consequent orders need to be set aside on this ground as well. Appeal allowed.

Summary

Issues:
1. Denial of Cenvat credit under Rule 3 of Cenvat Credit Rules, 2004.
2. Recovery of wrongly availed Cenvat credit.
3. Imposition of interest and penalty under relevant provisions.
4. Jurisdictional authority to determine manufacturing activities.
5. Assessment and jurisdictional issues in Cenvat credit recovery.

Analysis:
1. The appellant, a manufacturer registered with the central excise department, filed an appeal challenging the denial of Cenvat credit by the Commissioner (Appeals), based on the supplier's activities not amounting to manufacturing. The order-in-original upheld by the Commissioner imposed recovery of wrongly availed credit, interest, and penalty under Cenvat Credit Rules, 2004, and Central Excise Act, 1944.

2. The investigation revealed that the supplier paid duty under section 11D, not excise duty, leading to the denial of Cenvat credit. The Assistant Commissioner issued a show cause notice proposing recovery under Rule 14 of Cenvat Credit Rules, 2004, read with section 11A, along with interest and penalty under relevant provisions.

3. The appellant's grounds for appeal included failure to consider submissions, incorrect assessment of suppliers' activities, and time-barred demand. The Authorized Representative for the Revenue argued that the amount paid by the supplier was not excise duty but a deposit under section 11D, hence not eligible for credit under CCR.

4. The Tribunal noted that the appellant received and accounted for goods as excise duty paid, disputing the Revenue's characterization. It emphasized that jurisdictional officers of the supplier should assess duty liability, not the appellant's officer, questioning the authority of the show cause notice.

5. Highlighting the appellant's lack of obligation to investigate suppliers' manufacturing activities, the Tribunal ruled in favor of the appellant, setting aside the denial of Cenvat credit and associated recovery. It emphasized the assessment jurisdiction and the absence of buyer's obligation to verify supplier activities for credit eligibility, allowing the appeal with consequential relief.

This detailed analysis of the judgment addresses the issues raised, the legal arguments presented, and the Tribunal's reasoning leading to the decision in favor of the appellant.