2005 (3) TMI 249 - AT - Central Excise

Summary

Issues Involved: Appeal against demand of duty, Cenvat credit wrongly availed, imposition of penalty under Cenvat Credit Rules, 2001 & 2002, Central Excise Act.

Summary:
The appeal was filed challenging the demand of duty amounting to Rs. 7,56,221/- for wrongly availing Cenvat credit on yellow phosphorous supplied by M/s. Pentafour Products Ltd. The Commissioner of Central Excise (Appeals) had upheld the demand, ordered recovery of the amount with interest under Rule 12 of the Cenvat Credit Rules, and imposed penalties under various sections of the Central Excise Act.

The show cause notice alleged that the input supplier had not paid countervailing duty on the inputs, leading to contravention of Cenvat Credit Rules. The appellants claimed they had taken reasonable steps and provided evidence of duty payment by the supplier. However, the Joint Commissioner confirmed the demand and penalties, which was upheld by the Commissioner (Appeals) based on the supplier being a 100% EOU required to pay duty before removal of inputs.

Upon careful examination of relevant provisions and documents, it was established that the duty on inputs had been paid by the supplier, and the appellants had taken reasonable steps to ensure the same. The Development Commissioner had permitted the supplier to sell unutilized material in DTA on payment of applicable duty prior to the supply of inputs. Additionally, a CBEC circular clarified the recovery of duty from the defaulting supplier without impacting the consignee's Cenvat credit.

In conclusion, the Tribunal held that the appellants were entitled to the credit, set aside the previous order, and allowed the appeal.