2013 (2) TMI 619 - AT - Central Excise

Cenvat credit on the input packing materials that had gone into the manufacture of exempted products - Non maintenance of separate inventory/records - appellants manufactured both dutiable as well as exempted product - demand for recovery of Modvat credit wrongly availed and equivalent amount of penalty - Held that - Modvat credit against all these Invoices were not availed by the appellants during the material period 1998-1999 to 2001 - 2002. The 23 Nos. of Invoices involving the credit of Rs.88, 000.33 were considered by the Commissioner (Appeals) but the benefit was not extended fully on the ground that the benefits were already extended to them in the impugned show-cause notices. But as find that in the show-cause notice the demand was calculated on pro rata basis and not on actual basis. Accordingly in view of the scrutiny/examination of Department it can safely be concluded that the appellants did not avail modvat credit against 26 Nos. of Invoices involving credit of Rs.88, 000.33 and also 17 Nos. of Invoices involving credit of Rs.99, 825/-. The entire amount of cenvat credit not availed by them during the said period works out at Rs.1, 87, 825/- which clearly covers the amount of cenvat credit alleged to have been wrongly availed on the common inputs/packing materials used in or in relation to the manufacture of dutiable as well as exempted products. In these circumstances the appellants had not availed cenvat credit of Rs.1, 48, 630/- on the input packing materials that had gone into the manufacture of exempted products - in favour of assessee.

Summary

Issues:
- Appeal against Order-in-Appeal regarding modvat credit availed by the appellants.
- Reduction of demand by the ld. Commissioner (Appeals).
- Consideration of additional evidence of 17 Invoices.
- Verification of documents by the ld. A.R. for the Revenue.
- Decision on whether modvat credit was wrongly availed by the appellants.

The appeal was filed against the Order-in-Appeal related to the modvat credit availed by the appellants. The appellants, engaged in manufacturing medicines falling under Chapter 30 of CETA, used common inputs/packing materials without maintaining separate inventory/records as required. A demand was issued for recovery of modvat credit wrongly availed during 1998-1999 to 2001-2002. The ld. Commissioner (Appeals) reduced the demand to Rs.60,630 with an equivalent penalty. Both Revenue and the Appellant appealed before the Tribunal, leading to a remand to the ld. Commissioner (Appeals) for denovo adjudication. The appellants produced documentary evidence claiming non-availment of cenvat credit amounting to Rs.88,000.33 against 26 Invoices. The ld. Commissioner (Appeals) accepted and reduced the demand but confirmed duty of Rs.1,11,986.40 and imposed an equivalent penalty, leading to the present appeal.

The ld. Consultant for the appellant argued that the ld. Commissioner (Appeals) did not consider the full amount of modvat credit of Rs.88,000.33 against 26 invoices, claiming that benefits were extended on a pro rata basis. Additionally, the appellants possessed 17 more Invoices involving credit of Rs.99,825, which were seized by the DGAE office earlier. These invoices were now presented as additional evidence for consideration. The ld. Consultant contended that the total modvat credit forgone was Rs.1,87,825 for the period in question.

The ld. A.R. for the Revenue acknowledged that the entire show-cause notice was calculated on a pro rata basis. He agreed to admit the additional evidence of 17 Invoices under Rule 23 of CESTAT Procedure Rules, 1982. After scrutiny, the ld. A.R. confirmed that modvat credit was not availed on these 17 Invoices and earlier 23 Invoices produced before the ld. Commissioner (Appeals).

After hearing both sides and examining the records, the Tribunal noted that this was the second round of litigation. The additional evidence provided by the appellants was accepted. The ld. A.R. for the Revenue verified the documents and conceded that modvat credit was not availed by the appellants against the Invoices in question. It was concluded that the appellants had not availed modvat credit against the Invoices, totaling Rs.1,87,825, covering the alleged wrongly availed credit on common inputs/packing materials. Consequently, the order of the ld. Commissioner (Appeals) was set aside, and the appeal by the appellants was allowed with any consequential relief as per law.