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2017 (2) TMI 1067 - HC - Central ExciseCENVAT credit - Inter-unit transfer - clandestine removal - whether CENVAT credit can be denied on the ground that the dough was cleared clandestinely without payment of duty from one unit to another of the same company? - Held that - the Appellant has remitted the duty and is thus entitled to the credit claimed. The embargo in terms of Rule 9(b) of the CENVAT Credit Rules 2004 is not attracted in the facts and circumstances - Appeal allowed - decided in favor of appellant.
Issues:
1. Application of Rule 9(b) of CENVAT Credit Rules, 2004 to inter-unit transfer of semi-finished goods. 2. Denial of CENVAT credit due to alleged clandestine clearance of dough between company units. 3. Allegations of clandestine removal of goods and suppression by the Central Excise authorities. 4. Validity of Settlement Commission's order and its impact on the case. 5. Interpretation of notification 20/2009-CE (N.T.) exempting dough from duty. Issue 1: Application of Rule 9(b) of CENVAT Credit Rules, 2004 The case involved a dispute regarding the application of Rule 9(b) of the CENVAT Credit Rules, 2004 to an inter-unit transfer of semi-finished goods. The appellant contested the imposition of this rule, arguing that there was no clandestine removal to a third party by way of sale. The authorities alleged that the duty paid had become recoverable due to fraud, collusion, or suppression of facts, leading to a demand for recovery of CENVAT duty along with interest and penalty. Issue 2: Denial of CENVAT Credit for Alleged Clandestine Clearance The Central Excise authorities issued a show cause notice alleging clandestine removal of dough between the appellant's units, triggering a demand for duty payment. The appellant contended that it had voluntarily remitted duty upon realizing the liability, enabling the unit at Spencer Plaza to avail CENVAT Credit. However, the authorities invoked Rule 9(b) to deny the credit, citing contravention of provisions due to suppression and evasion of duty. Issue 3: Allegations of Clandestine Removal and Suppression The appellant, a manufacturer of dough and cookies, faced allegations of clandestine removal of goods and suppression by the Central Excise authorities. Despite the appellant's explanations and voluntary duty remittance, the authorities confirmed the demand in the first appeal, subsequently upheld by the CESTAT. The Settlement Commission's order, which initially favored the appellant, was challenged and set aside by the High Court, impacting the findings related to suppression. Issue 4: Validity of Settlement Commission's Order The Settlement Commission's order, initially accepted by the appellant, was later challenged by the Central Excise Department and set aside by the High Court. The CESTAT's reliance on the settlement commission's findings related to suppression was deemed misplaced following the High Court's decision, emphasizing that the settlement commission's order and its findings were no longer relevant. Issue 5: Interpretation of Notification 20/2009-CE (N.T.) The judgment also analyzed the applicability of notification 20/2009-CE (N.T.), which exempted dough from duty payment for a specified period. The notification indicated an intention to exempt duty on dough, which influenced the decision in favor of the appellant. The court concluded that the appellant, having remitted the duty, was entitled to the claimed credit, and Rule 9(b) of the CENVAT Credit Rules 2004 did not apply in this context. This comprehensive analysis of the judgment highlights the key legal issues, arguments presented, and the court's reasoning in resolving the dispute.
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