2024 (2) TMI 1301 - AT - Central Excise

CENVAT Credit - clearance of inputs as such - recovery of credit alongwith interest and penalty - sub-rule (5) of Rule 3 of Cenvat Credit Rules, 2004 - HELD THAT - On going through decision of this Tribunal in the case of THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES 2012 (7) TMI 141 - BOMBAY HIGH COURT . In the said case, cenvat credit was availed and after processing of inputs, the same was utilized towards payment of duty and subsequently it was held that the process which was undertaken did not amount to manufacture and, therefore, the said clearances did not attract central excise duty. Under those circumstances, it was held that since the duty payment was accepted by Revenue, the availed cenvat credit cannot be reversed. Such circumstances are not available in the present case. Therefore, the ruling in the said case is not applicable in the present case. Insofar as the impugned order is concerned in respect of the allowance of cenvat credit of Rs.5,63,66,047/- is concerned, there are no infirmity with the same - that part of the impugned order through which cenvat credit of Rs.5,63,66,047/- was disallowed is not interfered and is ordered to be recovered along with interest and equal penalty. Demand of Rs.1,18,45,107/- - HELD THAT - The appellant was eligible to debit proportionate cenvat credit attributable to trading activity and we also find that such debited amount of Rs.3,44,773/- was appropriated by the original authority - the impugned order in respect of demand of Rs.1,18,45,107/-, interest and penalty is set aside. The penalty imposed on Shri Vijay S. Nair, Managing Director is set aside, and there are no omission or commission on his part in causing any loss to the exchequer. Appeal allowed in part.

Summary

Issues involved:
The issues involved in the judgment are the availing of inadmissible cenvat credit by a manufacturing unit and its Managing Director, the utilization of cenvat credit for clearance of inputs not received in the factory, the reversal of cenvat credit, and the imposition of penalties.

Availing of Inadmissible Cenvat Credit:
The manufacturing unit imported vinyl acetate monomer and stored it in a Customs Bonded Warehouse, clearing it directly to customers from the warehouse without bringing it into the factory. The unit maintained records indicating receipt and clearance from the factory, availed cenvat credit without bringing the goods into the factory, and passed on the credit to customers. The Revenue issued a show cause notice alleging inadmissible cenvat credit availed by the unit. The original authority confirmed the demand, stating that despite reversing some credit, the unit had passed on the credit to customers. The Tribunal upheld the disallowance of cenvat credit of Rs.5,63,66,047, ordering its recovery with interest and penalty.

Utilization of Cenvat Credit for Clearance of Inputs Not Received:
The unit availed cenvat credit for inputs not received in the factory and utilized it for clearance of inputs as if received in the factory. The unit contended that it had reversed the credit, but the Tribunal found that the credit was utilized for direct sales from the warehouse. The Tribunal held that the availed cenvat credit was inadmissible and ordered its recovery along with interest and penalty.

Reversal of Cenvat Credit and Imposition of Penalty:
The unit argued that it had reversed proportionate credit attributable to trading activity, citing various tribunal decisions. The Tribunal noted that the unit had not followed the required procedure for reversing the credit and upheld the demand of Rs.1,18,45,107. However, the Tribunal set aside the demand, interest, and penalty related to this issue. The Managing Director, who reversed the credit immediately, was not found to have caused any loss to the exchequer, and the penalty imposed on him was set aside.

Conclusion:
The Tribunal allowed one appeal and partially allowed another, disallowing the inadmissible cenvat credit availed by the unit but setting aside the demand, interest, and penalty related to the reversal of proportionate credit. The penalty imposed on the Managing Director was also set aside.