2024 (2) TMI 11 - AT - Central Excise

Recovery of CENVAT Credit with penalty - denial on the ground that endorsed Bill of Entry is not a proper document for availment of CENVAT credit and Notifications issued for FMC and DFCE Scrips do not provide for transfer of credit - extended period of limitation - penalty u/r 26 of CER - HELD THAT - Mere non-mention of the appellant as the supporting manufacturer, cannot take away the substantial benefit of CENVAT credit, looking into the fact that the appellant s name is mentioned in the Bills of Entry as a supporting manufacturer. Moreover, as submitted by the learned Counsel for the appellants, there is no bar on the importer to send the goods for job-work. It is not mentioned in the notifications under discussion that the job-worker should be a job-worker who is working under the provisions of Notification No.214/86. The fact that the ownership of the goods always remained with the importer i.e. M/s Hero Exports Ltd, the activity undertaken by the appellants is that of a mere job-worker. Further, if it was the case of the Department that the conditions of Customs Notification have been violated by the importer i.e. M/s Hero Exports Ltd, the importer should have been proceeded against for any such violation and not the appellant - the appellants having received the goods in the factory; having used the same in the manufacture and clearance of excisable goods cleared on payment of duty cannot be dis-entitled to the benefit of CENVAT credit. Extended period of limitation - HELD THAT - The Department is not free to change the stand detrimental to the appellant/ assessee. Moreover, having issued the show-cause notice, it is not free for the Department to invoke extended period in the impugned show-cause notices which are subsequent to the show-cause notice dated 08.05.2009. Further, no element of suppression, mis-statement, fraud, collusion etc. with intent to evade payment of duty has been established against the appellants. Therefore, the Department has not made out any case for invocation of extended period - the impugned show-cause notices are barred by limitation. Penalties u/r 26 of CER - HELD THAT - When the demand itself cannot be sustained, the question of imposition of penalties does not arise - the submissions of the learned Counsel for the appellants is agreed that penalty, under Rule 26, cannot be imposed on companies. Appeal allowed.

Summary

Issues Involved:
1. Entitlement to CENVAT credit based on endorsed Bill of Entry.
2. Availment of CENVAT credit under FMC and DFCE Scrips.
3. Invocation of extended period for recovery.
4. Imposition of penalty under Rule 26.

Summary:

Entitlement to CENVAT Credit Based on Endorsed Bill of Entry:

The primary issue was whether M/s Hero Cycles (Hero Ecotech Ltd) could avail CENVAT credit based on an endorsed Bill of Entry. The Department contended that such a document was not valid under Rule 9 of CENVAT Credit Rules, 2004. However, the Tribunal found that substantial compliance with CENVAT provisions was met, as the receipt, consumption, and clearance of goods were undisputed. The Tribunal referenced several cases, including Bando India Pvt. Ltd, which supported the validity of endorsed Bills of Entry for CENVAT credit. It concluded that the objections of the Department were not valid and that the credit availed by the appellants was correct.

Availment of CENVAT Credit Under FMC and DFCE Scrips:

The Tribunal addressed whether the appellants violated the conditions of respective notifications by availing CENVAT credit of CVD and ACD. It found that the non-mention of the appellant as a supporting manufacturer in the licenses did not negate the substantial benefit of CENVAT credit. The Tribunal emphasized that the goods were received and used in the manufacture of excisable goods cleared on payment of duty, thus fulfilling the conditions of the Central Excise Valuation Rules. It held that the appellants were entitled to the benefit of CENVAT credit.

Invocation of Extended Period for Recovery:

The Tribunal examined whether the extended period for recovery could be invoked. It noted that the Department had previously issued a show-cause notice on 08.05.2009, which did not dispute the availment of CENVAT credit but held that it should lapse upon exemption of e-bikes. The Tribunal found that the Department's changing stance was detrimental to the appellant. It concluded that no suppression, mis-statement, fraud, or collusion with intent to evade duty was established, rendering the invocation of the extended period unjustified. The impugned show-cause notices were deemed barred by limitation.

Imposition of Penalty Under Rule 26:

The Tribunal ruled that penalties under Rule 26 could not be imposed on companies, aligning with previous judgments. Since the demand itself could not be sustained, the question of penalties did not arise.

Conclusion:

All six appeals were allowed, with the Tribunal pronouncing that the appellants were entitled to CENVAT credit based on the endorsed Bill of Entry, and the demands and penalties imposed by the Department were unsustainable.