2017 (12) TMI 700 - AT - Central Excise

CENVAT credit - input - lead sub-oxide - appellant reversed Credit on being pointed out - Held that - description of the goods is Lead Sub-oxide but the first stage dealer had imported Lead Ingots which were subjected to some process and thereafter it was converted into Lead sub-oxide and then Lead Sub-oxide sold to the appellant - the appellant has reversed the credit along with interest also after admitting the mistake therefore I confirm the demand on the appellant that he has taken irregular cenvat credit which was reversed by him along with interest. Penalty - Held that - the appellants have not suppressed any material fact from the Department and he had a genuine belief that the credit shown in the invoice is available to them and therefore had a belief that the first stage dealer must have complied with the conditions and procedure and the provisions of the law - imposition of penalty on the appellant and its Director is not warranted under law. Appeal allowed in part.

Summary

Issues:
Irregular availment of cenvat credit, Confirmation of Order-in-Original, Imposition of penalty under Rule 25 read with Section 11AC of the Central Excise Act 1944, Personal penalty under Rule 15 of the Cenvat Credit Rules 2004.

Analysis:
The appeal was filed against an order passed by the Commissioner (Appeals) rejecting the appellant's appeal and confirming the Order-in-Original due to alleged irregular availment of cenvat credit. The appellant, engaged in battery manufacturing, availed cenvat credit on "lead sub-oxide" from a registered dealer, M/s. H.N. Enterprises. A show-cause notice was issued, proposing recovery of cenvat credit amount along with interest and penalty. The Assistant Commissioner confirmed the demand, imposed penalties, and appropriated the reversed amount. The appellant appealed, arguing that the order was unsustainable and citing circulars to support their case.

The appellant contended that they rightfully availed cenvat credit based on invoices from the first stage dealer, paid duty, and used inputs for manufacturing finished goods cleared with duty payment. They referenced a CBEC circular supporting non-recovery of credit if the consignee transaction's bona fide nature is undisputed. The respondent argued that the first stage dealer imported Lead Ingots, converted them into Lead Sub Oxide, and sold to the appellant, who negligently accepted the material without verifying its origin. The appellant believed the duty credit shown in the invoices was valid, later admitting the mistake and reversing the credit with interest, denying any intent to evade duty payment.

The Tribunal analyzed the case, noting discrepancies in goods description and tariff classification between the imported Lead Ingots and the sold Lead Sub Oxide. Despite the appellant's reversal of the credit and lack of intent to evade duty, irregular cenvat credit availed was confirmed. However, the Tribunal found no suppression of facts or deliberate evasion, leading to the dropping of penalties on the appellant and its Director. The appeal was partially allowed, with the penalty on the appellant and Director being dropped, concluding the judgment on 17/11/2017.