2016 (2) TMI 210 - AT - Central Excise

Denial of CENVAT credit on amount paid through PLA - Held that - In this case the appellant initially paid SED by utilizing their Cenvat credit account. The payment of excess rebate claim was paid through PLA is only a cross-entry for reversal of rebate claim received in cash by the appellant. Therefore, the Cenvat credit utilized for payment of SED was made good by the appellant taking on account of payment of SED through Cenvat credit account of which claim received was paid through PLA. In these circumstances, we hold that appellant has correctly taken the Cenvat credit in their Cenvat credit account being a peculiar situation in the matter. In these circumstances, we hold that appellant has taken Cenvat credit correctly as initially appellant has taken Cenvat credit in their Cenvat credit account on procurement of input/capital goods which was used for payment of SED by the appellant. - Decided in favour of assessee

Summary

Issues:
Appeal against denial of Cenvat credit, Incorrect payment of SED, Entitlement to Cenvat credit without receiving inputs/capital goods.

Analysis:
The appellant, a manufacturer of Pneumatic Rubber Tyres and Tractor Rear Tyres, exported goods and claimed rebate on duty paid. Subsequently, it was discovered that the appellant overpaid Special Excise Duty (SED) on the exported goods. The excess rebate claim was demanded back, which the appellant paid through PLA and then took credit in their Cenvat Credit Account. The Revenue objected to this, arguing that since the appellant did not receive any inputs/capital goods, they were not entitled to take Cenvat credit. A show cause notice was issued, leading to confirmation of duty demand, interest, and imposition of a penalty. The appellant appealed against this decision.

The appellant contended that they correctly took the Cenvat credit as the excess rebate claim was paid through PLA after realizing the error in payment of SED. They relied on previous Tribunal decisions to support their claim. On the other hand, the Revenue argued that since the excess rebate claim was paid through PLA, the appellant was not eligible for Cenvat credit as it is typically available only on the procurement of input/capital goods.

After hearing both parties, the Tribunal analyzed the situation. It was noted that the appellant initially paid SED using their Cenvat credit account, and the payment of excess rebate claim through PLA was merely a corrective measure for the erroneous payment of SED. The Tribunal held that the Cenvat credit utilized for SED payment was restored by the appellant through the PLA payment, making the Cenvat credit claim valid. The Tribunal emphasized that the appellant had initially taken Cenvat credit for input/capital goods procurement, which was eventually used for SED payment. Consequently, the Tribunal set aside the impugned order, allowing the appeal and any consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, acknowledging the unique circumstances of the case where the Cenvat credit utilization was rectified through the PLA payment, ultimately validating the appellant's claim for Cenvat credit despite the absence of direct input/capital goods procurement.