2010 (3) TMI 549 - AT - Central Excise

Cenvat/Modvat - Documents for taking credit - The respondent are manufacturers of the goods falling under sub-heading 8708 10 10 of the Central Excise Tariff and they also availed Cenvat credit of duty on the inputs under Cenvat Credit Rules, 2004. A show cause notice dated 31-10-2005 was issued to the respondent seeking recovery of allegedly wrongly taken Cenvat credit amounting to Rs. 9,586/- alongwith interest which has been taken on the basis of an invoice issued by M/s. Golden Steel Company.Department s allegation was that the invoice issued by M/s. Golden Steel Company is not invoice issued by the 1st stage dealer or second stage dealer or a manufacturer and hence not a valid duty paying document for taking Cenvat credit. Held that - since M/s Golden Steel company had purchased the goods from M/s Gautam steel Traders who are not first stage dealer, M/s Golden Steel Company are not covered by under second stage dealer as define in rule 2(s). Therefore, invoice issued by M/s Golden Steel Company not a valid duty paying document for taking cenvat credit.

Summary

Issues:
1. Validity of Cenvat credit on the basis of invoice from M/s. Golden Steel Company.
2. Interpretation of "first stage dealer" and "second stage dealer" under Cenvat Credit Rules, 2004.
3. Imposition of penalty under Rule 15(1) of Cenvat Credit Rules.

Analysis:
1. The appeal by the Revenue challenged the setting aside of Cenvat credit demand against the respondent company and the penalty imposed. The respondent, a manufacturer, availed Cenvat credit on the inputs under Cenvat Credit Rules, 2004, based on an invoice from M/s. Golden Steel Company. The Department alleged the invoice was not valid for Cenvat credit. The Assistant Commissioner confirmed the Cenvat credit demand and penalties, which were appealed by the respondent and the other two parties involved. The Commissioner (Appeals) set aside the demand and penalties on the respondent but upheld penalties on the other parties. The Revenue appealed this decision.

2. The Departmental Representative argued that the invoice from M/s. Golden Steel Company was not valid for Cenvat credit as they were not a "second stage dealer" based on the definition in the Cenvat Credit Rules. The goods had passed through various stages of sale, involving different entities. The Judge analyzed the transactions and determined that M/s. Golden Steel Company did not qualify as a second stage dealer, rendering the invoice invalid for Cenvat credit. The Judge concluded that the respondent had wrongly taken the credit based on an invalid document, attracting penalty under Rule 15(1) of the Cenvat Credit Rules.

3. The Judge carefully considered the submissions and records, highlighting the definitions of "first stage dealer" and "second stage dealer" under the Cenvat Credit Rules. The analysis revealed that the transactions did not align with the definitions provided in the rules. As a result, the Judge set aside the Commissioner (Appeals)'s decision and restored the order-in-original passed by the Assistant Commissioner, allowing the Revenue's appeal. The ruling emphasized the importance of adhering to the defined criteria for valid duty payment documents under the Cenvat Credit Rules to prevent wrongful credit claims and penalties.

This detailed analysis of the judgment showcases the intricacies of the case, focusing on the interpretation of legal provisions and their application to the specific facts presented in the appeal.