2015 (12) TMI 1103 - AT - Central Excise

Denial of concessional rate of duty - Due to shortage of space, the appellant kept the imported materials partly adjacent to the factory premises - demand of cenvat credit alongwith interest and imposed penalty of equal amount - Held that - Adjudicating Authority had observed that there was a procedural lapse of not applying to the Dy. Commissioner under Rules 8 of Cenvat Credit Rules 2004 for keeping waste paper in the go-down adjacent to the factory. It is further observed that, it is not a procedural lapse but, clear violation of the said Rules. The appellant is a Limited company in organized sector and they should have obtained proper permission to store the imported waste i.e., inputs, outside the factory premises - assessee is entitled to storage of inputs outside the factory of the manufacturer, subject to the permission from the Dy. Commissioner, Central Excise or the Asstt. Commissioner, Central Excise as the case may be, having jurisdiction over the factory of the manufacturer. The proviso to Rule 8 states that, if such input is not used in the manner specified in the rules, the manufacturer of the final products shall pay an amount equal to the credit availed therein. In my considered view, the demand of cenvat credit would arise if the manufacturer fails to establish that the input in question was not used in the manufacture of final products. - impugned order is modified to the extent that the demand of Central Excise duty of ₹ 8,99,996/- alongwith interest is upheld. The Adjudicating authority is directed to re-examine the balance amount of demand of ₹ 6,03,392/- alongwith interest and imposition of penalty - Appeal disposed of.

Summary

Issues: Cenvat credit denial for storing imported goods outside factory premises without permission, procedural lapse under Rule 8 of Cenvat Credit Rules 2004, imposition of penalty under Section 11AC of the Act 1944, utilization of inputs in the manufacture of final product.

Analysis:

1. Cenvat Credit Denial: The case involved the denial of cenvat credit amounting to Rs. 19,53,563/- due to the appellant storing imported goods outside the factory premises without obtaining permission as required by Rule 8 of the Cenvat Credit Rules 2004. The Adjudicating Authority confirmed the demand, and the Commissioner (Appeals) rejected the appeal. The appellant contested the demand, arguing that the inputs were consumed in the manufacture of the final product, as evidenced by certificates issued by the Asstt. Commissioner of Central Excise and Customs. The Tribunal found that while there was a procedural lapse in not obtaining permission, the demand of cenvat credit would only be justified if the inputs were not used in the final product. The Tribunal directed the Adjudicating Authority to re-examine the demand considering the utilization of inputs in the final product.

2. Procedural Lapse under Rule 8: The Tribunal observed that the appellant, a Limited company in the organized sector, had violated Rule 8 of the Cenvat Credit Rules by storing imported waste outside the factory premises without the required permission. The rule allows for storage outside the factory under exceptional circumstances with permission from the appropriate authority. The Tribunal emphasized the importance of following procedural requirements and directed the Adjudicating Authority to consider the violation while re-examining the case.

3. Imposition of Penalty: The appellant argued against the imposition of penalty under Section 11AC of the Act 1944, stating there was no intent to evade duty, and they had promptly informed authorities about the fire incident. The Tribunal acknowledged the lack of suppression of facts but noted that penalties could still be imposed for non-compliance with rules. The Adjudicating Authority was directed to reconsider the imposition of penalties after a proper hearing.

4. Utilization of Inputs in Final Product: The key issue revolved around whether the inputs stored outside the factory premises were actually used in the manufacture of the final product. The appellant provided certificates indicating the consumption of inputs, but these documents were not adequately presented before the lower authorities. The Tribunal emphasized the importance of substantiating the utilization of inputs and directed the Adjudicating Authority to consider this aspect while re-evaluating the demand and potential penalties.

In conclusion, the Tribunal modified the impugned order, upholding the demand of Central Excise duty for the deposited amount and directing a re-examination of the remaining demand and penalties. The appellant was granted an opportunity to present the necessary documentation to support the utilization of inputs in the final product before a final decision is made.