2017 (1) TMI 791 - AT - Central Excise

CENVAT credit - availing of credit at the time of acquisition - Rule 57S(2)(C) Central Excise Rules, 1944 - Rule 3(4) of CCR 2001 - whether the appellant is liable to pay duty on removal of used Brass Tubes (capital goods) during the period 2002-03 on which Cenvat Credit was not taken? - Time limitation - Held that - there is no categorical allegation that the appellant had taken Cenvat Credit on the Brass Tubes removed during a particular financial year. Further, the whole transaction was duly recorded in the books of accounts ordinarily maintained by the appellant - the demand is hit by limitation and also bad on merits, as the condition precedent in Rule 57S(2)(C) Central Excise Rules, 1944 and/or Rule 3(4) of CCR 2001, Being taking of credit at the time of acquisition, being absent, the demand is not sustainable on merits The Ld. Commissioner (Appeals) have erred in refusing to go into the grounds, on merits, as in Revenue matters first appellate proceedings are an extension of the adjudication/assessment proceedings. Appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Liability to pay duty on removal of used Brass Tubes without Cenvat Credit during 2002-03.
2. Validity of show cause notices in relation to limitation.

Analysis:

Issue 1: Liability to pay duty on removal of used Brass Tubes without Cenvat Credit during 2002-03:
The appellant, engaged in the manufacture of V.P. Sugar & Molasses, cleared used Brass Tubes to M/s Multimetal Ltd. for conversion into new tubes without paying duty. After conversion, the new tubes were received back by the appellant who utilized them in their factory after availing credit on the duty paid by MML. The Revenue contended that the used Brass Tubes were liable for duty payment as the appellant failed to comply with the requirements of the exemption notification. Two show cause notices were issued alleging non-payment of duty, credit taken twice on the same tubes, and non-compliance with Notification No. 214/86-CE. The adjudicating authority confirmed the duty demand and imposed penalties. The Commissioner (Appeals) refused to decide on merits, invoking the extended limitation period. However, the tribunal held that the demand was hit by limitation and not sustainable on merits as the appellant did not take Cenvat Credit on the Brass Tubes removed during the specific financial year. The demand was deemed vague, and the whole transaction was duly recorded in the appellant's books, leading to the setting aside of the impugned order.

Issue 2: Validity of show cause notices in relation to limitation:
The show cause notices alleged non-payment of duty and imposition of penalties. The Commissioner (Appeals) rejected the appeals, citing the appellant's failure to raise grounds on merit before the Adjudicating Authority. However, the tribunal held that in Revenue matters, first appellate proceedings are an extension of the assessment proceedings. The demand was found to be hit by limitation as there was no specific allegation of Cenvat Credit taken on the Brass Tubes during a particular financial year. The demand was deemed vague, and the whole transaction was duly recorded in the appellant's books, leading to the setting aside of the impugned order. The appellant was entitled to consequential benefits.

In conclusion, the tribunal allowed both appeals, setting aside the impugned order and ruling in favor of the appellant based on the limitations and merits of the case.