2024 (1) TMI 391 - AT - Central Excise

Recovery of duties of central excise leviable on manufacture of active pharmaceutical ingredient (AQI - also known as bulk drugs) - irregular availment of CENVAT Credit - input services - HELD THAT - The impugned order has fastened recovery of credit availed during the disputed period by relying upon statements on the premise of being tenable merely for not having been retracted. It is seen that reliance had been placed on the statement of Shri Anand Dhokia and which, by its contents, was held as having absorbed the statement of Sachin Madan with it. With the former having been made a noticee and response thereto being denial of the charges, that could well be deemed to be retraction that neutralizes the presumption that the adjudicating authority relied upon for conclusion as facts. Disallowance of credit cannot rest upon statements but must stand the test of definition of input service in rule 2(l) of CENVAT Credit Rules, 2004 on facts which is sorely lacking in the impugned order. The observation of the adjudicating authority that it is upto the assessee to establish eligibility is, in our view, not a correct appreciation of CENVAT Credit Rules, 2004 inasmuch as recovery, initiated under rule 14 of CENVAT Credit Rules, 2004, must engage the assessee with evidence to justify such recovery which is only then open to disputation. Matter remanded back to the original authority to decide the charges afresh - appeal allowed by way of remand.

Issues involved: Recovery of duties of central excise on manufacture of 'active pharmaceutical ingredient' and irregular availment of CENVAT Credit under CENVAT Credit Rules, 2004.

Recovery of Duties of Central Excise:
The appeals by the assessee, M/s Wanbury Ltd, pertained to the recovery of central excise duties on the manufacture of 'active pharmaceutical ingredient'. The Commissioner of Central Excise, Raigad, found that certain services procured by the assessee, such as art designing, consultancy, credit card services, and others, were not related to the manufacturing activity at Patalganga plant. The adjudicating authority relied on circulars by the Central Board of Excise & Customs and statements by individuals to conclude that the availment of credit was ineligible.

Irregular Availment of CENVAT Credit:
The proceedings revealed that the assessee had initially reversed credit on certain services like security and stock broker services. Subsequent scrutiny led to further reversals on services procured for the 'formulation division' and other 'cost centres'. The appellant claimed that a certain amount had been erroneously debited and sought restoration of credit. However, the adjudication authority found the claim unsupported by evidence and confirmed the amount as proposed in the show cause notice.

Legal Arguments and Precedents:
The appellant contended that the services procured were related to manufacturing activities and complied with rule 7 of the CENVAT Credit Rules, 2004. They argued that the date of registration as an 'input service distributor' was not relevant as long as the services were towards eligible manufacturing activities. The appellant cited various tribunal and high court decisions to support their claim that the assigning of credit was an internal arrangement within the rules.

Judgment and Remand:
The Tribunal found that the impugned order lacked a proper justification for disallowing the credit availed during the disputed period. The reliance on statements without factual evidence of ineligibility was deemed insufficient. Therefore, the Tribunal set aside the impugned order and remanded the matter back to the original authority for a fresh determination based on the facts presented by the appellant and the relevant judicial decisions cited.

(Order pronounced in the open court on 09/01/2024)

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