2017 (1) TMI 532 - AT - Central Excise

CENVAT credit - goods cleared was treated as clandestine removal - Appellant utilized such credit on payment of duty on the clearance of the goods for export through merchant exporters. - Held that - there is no dispute that demand in the present proceedings was confirmed by the adjudicating authority as nonpayment of duty on the finished goods cleared by the respondent on the ground that though the duty was paid but utilizing the wrongly availed Cenvat credit - With this position that the Cenvat credit availed by the respondent was held to be correct then utilization thereof also stands legal and correct - credit allowed - appeal dismissed - decided against Revenue.

Summary

Issues: Allegation of fraudulent passing of credit by supplier, Utilization of wrongly availed Cenvat credit for payment of duty, Dispute over demand confirmation, Appeal against Commissioner(Appeals) decision

In this case, the appellant availed credit on input received from a supplier, who was alleged to have fraudulently passed on the credit. The appellant used this credit to pay duty on goods cleared for export. The demand was confirmed on the grounds that the utilization of the credit for duty payment was illegal due to the alleged fraudulent passing of credit. Simultaneously, a show cause notice was issued for denial of the same credit. The Tribunal's division bench previously dropped proceedings related to the alleged wrong availment of credit, stating that there was no mistake on the appellant's part. The Commissioner(Appeals) allowed the respondent's appeal, leading to the Revenue's appeal.

The Revenue argued that the supplier fraudulently passed on the credit, making it unavailable to the respondent, and thus, the duty payment using such credit was incorrect. They contended that the goods cleared using this credit should be treated as clearance without duty payment. On the other hand, the respondent's counsel argued that a separate proceeding had settled the issue of the credit's correctness in favor of the respondent, making its utilization legal and correct.

Upon review, the Tribunal found that the demand was based on nonpayment of duty due to the utilization of wrongly availed credit. The Tribunal's previous order had already established the correctness of the credit availed by the respondent, making its utilization legal. Consequently, the demand confirmed by the Adjudicating authority was deemed untenable. The Commissioner(Appeals) rightly set aside the demand, leading to the dismissal of the Revenue's appeal.