2012 (5) TMI 353 - AT - Central Excise

Cenvat credit - wrongly taken Cenvat credit - department was of the view the credit on the basis of endorsed invoices/bill of entry is not correct Held that - Cenvat credit in respect of capital goods which are alleged to have been used exclusively for manufacture of the goods on job work basis, which were cleared at nil rate of duty, since the appellant during that period were regularly filing the ER-1 returns and the fact of clearance of goods without payment of duty under job work challan under Notification No. 214/86-C.E., was known to the department, it is difficult to accept the department s contention that the relevant information with regard to availment of the capital goods Cenvat credit was deliberately suppressed by the appellant, show cause notice is time barred and as such the Commissioner (Appeals) s order upholding the Cenvat credit demand is not sustainable, appeal is allowed

Summary

Issues:
1. Wrongly taken Cenvat credit amounting to Rs. 1,18,396/- and Rs. 1,09,695/- by the appellant.
2. Validity of the show cause notice issued for recovery of wrongly taken Cenvat credit.
3. Applicability of extended period under proviso to Section 11A(1) for recovery of wrongly taken Cenvat credit.
4. Allegation of fraud, wilful misstatement, suppression of facts, or contravention of rules with intent to evade payment of duty.
5. Interpretation of Cenvat Credit Rules regarding the availment of Cenvat credit.
6. Examination of the documents supporting the Cenvat credit claims.
7. Assessment of whether the appellant's actions constituted intentional wrongful availment of Cenvat credit.

Analysis:
The appellant, a manufacturer of Barium Ferrite Powder and Ferrite Magnate, faced allegations of wrongly availing Cenvat credit amounting to Rs. 1,18,396/- and Rs. 1,09,695/-. The dispute arose from the receipt and transfer of capital goods between their Okhla and Faridabad units, leading to the reversal of Cenvat credit and endorsement of invoices. The department issued a show cause notice for recovery, citing Rule 6(4) of Cenvat Credit Rules. The Assistant Commissioner confirmed the demand, imposing penalties, which was upheld by the Commissioner (Appeals), prompting the present appeal.

The appellant argued that the goods were transferred between units due to genuine mistakes and that the goods were not meant for the Okhla unit. They contended that the goods were cleared after reversing the Cenvat credit, thus denying any wrongful intent. Additionally, they claimed that the goods cleared under job work basis were not exempted goods under Rule 6(4) of Cenvat Credit Rules. The appellant also challenged the invocation of the extended period for recovery, asserting no element of fraud or suppression.

The Departmental Representative defended the demand, emphasizing that the goods were used for exempted goods under Notification No. 214/86-C.E. and that the documents supporting the Cenvat credit were invalid. They argued that the appellant suppressed information and invoked the longer limitation period under proviso to Section 11A(1).

The Tribunal considered the submissions and records, noting that the alleged wrongful availment was detected during an audit and that the goods were rightfully received by the Faridabad unit. They highlighted the lack of evidence for intentional wrongful availment and the regular filing of returns by the appellant. Consequently, the Tribunal held that the show cause notice was time-barred, setting aside the Commissioner (Appeals)'s decision and allowing the appeal.