2017 (2) TMI 193 - AT - Central Excise

Cenvat credit - Penalty - Rule 26 of Central Excise Rules, 2002 - Held that - I find that in respect of recovery of Cenvat credit of ₹ 1,87,056/- & ₹ 1,48,431/-, I accept the arguments putforth by counsel for M/s Manohar Lal Hira Lal Ltd. that there were no allegations in the said Show Cause Notice that the inputs were non-duty paid that the inputs were not received in the factory that the inputs were not issued for production. It is settled law that if there are no allegations about duty paid nature of inputs, inputs having received in factory and issued for production, Cenvat credit cannot be denied. I also accept the arguments putforth by counsel for M/s Manohar Lal Hira Lal Ltd. that demand of Central Excise duty of ₹ 3,47,575/- was worked out on the goods which had not reached RG-1 stage. Therefore, I set aside that part of the order of Commissioner (Appeals) through which confirmation of demand of ₹ 3,47,575/- was upheld - decided in favor of the assessee.

Summary

Issues:
- Disallowance of Cenvat credit
- Demand of Central Excise duty
- Imposition of penalty on Managing Director

Disallowance of Cenvat credit:
The case involved the disallowance of Cenvat credit by the Original Authority, which was challenged in the appeal before the Commissioner (Appeals). The Commissioner held that the appellants were entitled to credit on certain items, such as M.S. Plates and Hot Strips Mill Plates, and set aside the disallowance of credit on Zinc. The Commissioner's decision was based on a detailed examination of the evidence presented. The Tribunal, after considering the arguments, found that there were no allegations in the Show Cause Notice regarding the duty paid nature of inputs, their receipt in the factory, or issuance for production. As per established law, if such allegations are absent, Cenvat credit cannot be denied. Consequently, the Tribunal set aside the part of the Order-in-Appeal upholding the disallowance of Cenvat credit, thereby allowing the appeal by the appellants.

Demand of Central Excise duty:
Regarding the demand of Central Excise duty, the Commissioner (Appeals) upheld a portion of the demand while setting aside another part related to alleged shortages in stock. The appellant argued that the demand for shortages in Copper coated wire was not valid as the goods had not reached the required stage for entry into RG-1. The Tribunal agreed with this argument and set aside the confirmation of the demand related to the alleged shortage. Additionally, the demand for High Carbon Wire was challenged on the basis of eye-estimation rather than actual weighment, leading to the Tribunal deeming it presumptive and unsustainable. Consequently, the Tribunal allowed the appeal by the appellants and dismissed the appeals filed by the Revenue.

Imposition of penalty on Managing Director:
The case also involved the imposition of a penalty on the Managing Director of the company under Rule 26 of the Central Excise Rules, 2002. The Tribunal's decision primarily focused on the issues related to disallowance of Cenvat credit and demand of Central Excise duty. As the Tribunal allowed the appeal by the appellants on these main issues, the penalty imposed on the Managing Director was not specifically addressed in the judgment.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the disallowance of Cenvat credit and certain demands of Central Excise duty based on the lack of proper allegations and presumptive nature of the claims. The appeals filed by the Revenue were dismissed, and the Tribunal's decision highlighted the importance of evidence and legal requirements in such matters.