2014 (10) TMI 162 - AT - Central Excise

Benefit of Notification No. 67/95 dt. 16.3.95 - first unit send the goods to second unit without payment of duty but availing cenvat credit - second unit cleared to goods on payment of duty after processing - Held that - On perusal of the record, we find that in defence of the allegation made in the show cause, the respondents have prayed that if it is held that the respondents are two separate units, in that case, if duty is paid by one unit the same is entitled as Cenvat Credit to the another unit. As the respondent had made this defence in the replies to the show cause notice, the adjudicating authority agreed with this contention of the respondents and passed the order holding that they are entitled to take Cenvat Credit of duty paid by the another unit. The same view has been affirmed by the Ld. Commissioner (Appeals). In these circumstances, we do not find any infirmity with the impugned orders. As in this case, it is the defence of the respondents that if the benefit of notification is denied to them and it is held that the respondents are two different units, in that case, if duty is confirmed against one unit same is entitled as Cenvat Credit to another unit - Decided against Revenue.

Summary

Issues:
Interpretation of show cause notice scope and entitlement to Cenvat Credit.

Analysis:
The appeal was filed by the Revenue against orders stating authorities went beyond the allegations in the show cause notice. The case involved two units manufacturing White Zinc Oxide. Initially, one unit cleared processes to the other unit on payment of Central Excise duty. A letter highlighted both units should be considered part of the same factory. Later, one unit claimed the benefit of a notification for clearances between the units without duty payment. A show cause notice was issued to deny this benefit, proposing duty demand, interest, and penalties. Adjudicating authority held the units were separate legal entities and demanded duty. The authority also allowed Cenvat Credit transfer between units. Revenue contested this, arguing the authority overstepped the show cause notice scope. The appellate tribunal found the respondents' defense in the replies to the show cause notice justified the Cenvat Credit transfer. Upholding the lower orders, the tribunal dismissed the Revenue's appeals, affirming the entitlement to Cenvat Credit based on the respondents' defense.

This judgment primarily addressed the issue of whether the authorities exceeded the scope of the show cause notice and if the respondents were entitled to take Cenvat Credit of duty paid by one unit. The tribunal found that since the respondents had raised this defense in their replies to the show cause notice, the adjudicating authority rightly allowed the Cenvat Credit transfer between the units. The tribunal agreed with the lower authorities that if one unit paid duty, the other unit was entitled to take Cenvat Credit, as per the respondents' defense. Therefore, the tribunal upheld the impugned orders, dismissing the Revenue's appeals.