2015 (7) TMI 262 - AT - Central Excise

Non Reversal of CENVAT Credit on Closure of factory - allegation that appellants have closed down their Lead plant in July 1999 and dismantled the same in December 2003 and have not reversed the credit of Cenvat availed on lead concentrate lying in stock - Held that - Lead concentrate was recovered at the time of dismantling of the plant and it cannot be said that the assessee had intention to evade duty or avoid payment of tax and there is no clandestine removal. The appellant s claim is that the lead concentrate was received prior to 1994. Subsequently, finding no evidence for the same, they dropped the claim. Having regard to the facts and circumstances of the case, I consider that since the duty liability is not contested and even if it is not paid, learned counsel for the assessee has accepted the liability, the penalty can be waived. The reversal of credit is specifically under Rule 3 itself and instances where credits suffer reversal have been specified there itself. The Rule, as it exists after amendment of 2009, provides for reversal of credit when inputs where cleared as such or written off in the books of account because the inputs became unfit for use. Another provision for recovery of Cenvat credit is available under Rule 14 of Cenvat Credit Rules. This Rule provides for recovery of Cenvat credit wrongly taken or erroneously refunded. The Commissioner (Appeals) has discussed the provisions of Rule 3 relating to reversal and explained that situation in this case is not covered by the provisions. Rule 14 is not applicable since when the credit was taken on Zinc concentrate it was taken correctly and, it cannot be said that the credit was wrongly used since there is no such allegation. In this case, the provisions of Rule 14 are also not applicable. - penalty imposed on the appellant equal to the amount of confirmed duty of ₹ 8,96,325/- is set aside. The demand for Cenvat credit on the inputs cleared as such is sustained and the assessee should pay the same with interest - Decided partly in favor of assessee assesssee.

Summary

Issues:
1. Reversal of Cenvat credit on lead concentrate due to closure of lead plant.
2. Demand for reversal of Cenvat credit on specific quantities of lead concentrate.
3. Appeal against penalty and demand for reversal of Cenvat credit.
4. Interpretation of Cenvat Credit Rules regarding reversal of credit.

Issue 1: Reversal of Cenvat credit on lead concentrate due to closure of lead plant:
The case involved the appellants, manufacturers of Zinc and Lead Ingots, facing a demand for reversal of Cenvat credit on lead concentrate due to the closure of their lead plant. The dispute arose from the quantity of lead concentrate in stock, with the department contending that the credit on this quantity needed to be reversed as the plant was closed. The appellants argued against the reversal, stating that a portion of the stock was received prior to 1994 when no duty was applicable on lead concentrate.

Issue 2: Demand for reversal of Cenvat credit on specific quantities of lead concentrate:
The demand for reversal of Cenvat credit was divided into two portions: one related to the credit on lead concentrate cleared earlier, and the other on the quantity available in stock. The Commissioner (Appeals) upheld the demand on the cleared quantity but questioned the demand on the stock, citing the absence of provisions for demanding duty on stock that cannot be used further. Both the Revenue and the assessee appealed against different aspects of the decision.

Issue 3: Appeal against penalty and demand for reversal of Cenvat credit:
The appeal involved arguments regarding the liability for penalty and the demand for reversal of Cenvat credit. The appellant could not produce evidence of receiving lead concentrate before 1994, leading to the confirmation of a portion of the demand. However, the Tribunal considered the circumstances and waived the penalty, as the duty liability was accepted by the appellant.

Issue 4: Interpretation of Cenvat Credit Rules regarding reversal of credit:
The Tribunal analyzed the Cenvat Credit Rules concerning the reversal of credit on inputs. It was noted that the provisions for reversal were introduced in 2009 and applied when inputs were written off or became unfit for use. The Commissioner's decision was supported, emphasizing that the circumstances did not warrant the reversal of credit as per the existing rules. The Tribunal rejected the Revenue's appeal, finding no merit in their argument.

In conclusion, the Tribunal set aside the penalty imposed on the appellant but upheld the demand for Cenvat credit on cleared inputs. The decision regarding the remaining demand on stock was also upheld. Both appeals were disposed of accordingly, with the Tribunal providing a detailed analysis of the legal provisions and factual circumstances involved in the case.