2015 (10) TMI 1690 - AT - Central Excise

Duty demand - Shortage of finished goods - admissibility of cenvat credit on duty paid on the inputs received from 100% EOU - SAD - Credit on education cess - Held that - Appellant has relied upon the judgment of CESTAT Mumbai in the case of Emcure Pharmaceuticals Limited vs. CCE, Pune (2008 (1) TMI 147 - CESTAT, MUMBAI). No contrary judgment has been brought on record by the learned AR with respect to non admissibility of cenvat credit of education cess paid during the relevant period. Respectfully following the case law of Emcure Pharmaceuticals Limited vs. CCE Pune, I hold that cenvat credit of education cess of ₹ 60,291/- is admissible to the appellant - credit of ₹ 2,02,993/- with respect to SAD is admissible to the appellant. It is also observed from the case records that appellant has paid the entire amount of duty/ cenvat credit demanded in the show cause notice along with 25% of penalty. In view of the cenvat credit allowed with respect to education cess and SAD, the amount of remaining cenvat credit disallowed and quantum of 25% penalty is required to be reworked out. The same should be carried out by the adjudicating authority within a month from the date of receipt of this order under intimation to the main appellant. - However, penalty imposed is reduced - Decided partly in favour of assessee.

Issues involved:
1. Duty demand on shortage of finished goods
2. Admissibility of cenvat credit on duty paid on inputs received from 100% EOU
3. Admissibility of cenvat credit of education cess
4. Rejection of cenvat credit of SAD
5. Imposition of penalty on the Director

Duty demand on shortage of finished goods:
The main issue in the appeals was the duty demand on the shortage of finished goods found in the factory premises during a visit by departmental officers. The appellant admitted the shortage and debited an amount towards the duty involved. The Director of the appellant initially admitted to the clandestine removal of goods but later retracted the statement. The Revenue argued that a subsequent statement by the Director confirmed the clandestine removal. The Tribunal considered the case records and upheld the duty demand based on the Director's statements.

Admissibility of cenvat credit on duty paid on inputs received from 100% EOU:
Another issue was the admissibility of cenvat credit on duty paid on inputs received from a 100% EOU. The appellant challenged the denial of cenvat credit under the Order-in-Appeal, citing the formula prescribed under Cenvat Credit Rules. The Tribunal examined the case law and allowed the cenvat credit on education cess but rejected the credit of SAD initially disallowed by the appellate authority. The Tribunal directed the reworking of the remaining cenvat credit disallowed and the penalty amount.

Admissibility of cenvat credit of education cess:
Regarding the admissibility of cenvat credit of education cess, the Tribunal relied on the judgment of CESTAT Mumbai in a specific case and held that the credit was admissible to the appellant. No contrary judgment was presented to challenge this admissibility.

Rejection of cenvat credit of SAD:
The rejection of cenvat credit of SAD was based on the amendment to Rule 3(7)(a) of the Cenvat Credit Rules. The Tribunal found that the decisions cited by the appellant were not applicable post-amendment. However, considering the effect of the amendment, the Tribunal allowed the cenvat credit with respect to SAD.

Imposition of penalty on the Director:
Lastly, the Tribunal addressed the imposition of a penalty on the Director. The appellant argued that the penalty was excessive. After considering the circumstances, the Tribunal reduced the penalty imposed on the Director from Rs. 1 lakh to Rs. 25,000, deeming the reduced amount sufficient to meet the ends of justice.

In conclusion, the appeals filed by the appellants were allowed to the extent indicated in the judgment, with specific directions provided for reworking the cenvat credit and penalty amounts.

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