2017 (10) TMI 15 - AT - Central Excise

CENVAT credit - whether the appellant herein is manufacturer of DG sets were discharging appropriate Central Excise duty and were availing the benefit of Cenvat credit of the Central Excise duty paid on inputs? - Held that - the appellant herein could have been under bonafide impression that they have to discharge the Central Excise duty on the engines removed based upon the transaction value and has done so by reversing the said amount under the Cenvat credit, cannot be held as intention to remove the inputs by paying excess amount to enable the purchaser to avail Cenvat credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant is liable for recovery of excess Cenvat credit wrongly utilized?
- Whether the provisions of Rule 14 of Cenvat credit 2004 were correctly applied in the case?
- Whether the appellant had a bonafide belief regarding the discharge of duty liability on inputs removed as such?
- Whether the impugned order is sustainable?

Analysis:
1. The appellant was accused of clearing certain inputs without undertaking any manufacturing activity and reversing Cenvat credit in excess, leading to a demand for recovery of the excess Cenvat credit utilized. The adjudicating authority confirmed the demand, imposed penalties, and upheld by the first appellate authority, leading to the appeal before the Tribunal.

2. The appellant argued that the provisions of Cenvat credit Rules 2004 do not allow recovery unless the credit is wrongly availed. The appellant bonafidely paid the duty amount on transaction value as per Rule 3(4) and Rule 14 of the Cenvat credit.

3. The Tribunal noted that the impugned order failed to consider Rule 14 of Cenvat credit 2004 correctly, which applies only when the credit is wrongly taken or utilized. Since the appellant used the engines in manufacturing DG sets and paid appropriate duty on their transaction value, the demands under Rule 14 were unsustainable.

4. It was acknowledged that during the relevant period, there were disputes regarding the duty liability on inputs removed as such. The Tribunal held that the appellant's belief in discharging duty based on transaction value was bonafide and not an intention to enable the purchaser to avail Cenvat credit.

5. Consequently, the Tribunal found the impugned order unsustainable and allowed the appeal, setting aside the demands and penalties imposed on the appellant. The decision was based on the appellant's bonafide belief and the incorrect application of Rule 14 of Cenvat credit 2004.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, and the Tribunal's reasoning leading to the decision to set aside the impugned order.