2018 (4) TMI 217 - AT - Central Excise

CENVAT credit - duty paying documents - Rule 16 of the Central Excise Rules - Held that - there is no dispute regarding the goods received back from dealer which were duty paid and the only allegation against the appellant is that the credit notes are not the proper document for claiming CENVAT credit - also, subsequently the appellant has paid the duty at the time of clearance. CENVAT credit is being denied on procedural lapse which is not deniable under law - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of appellant's appeal by Commissioner(Appeals) regarding denial of CENVAT credit on returned goods due to procedural lapse.

Detailed Analysis:

1. Issue of Denial of CENVAT Credit:
The appellant, engaged in manufacturing various clothing items, availed CENVAT credit on returned goods from dealers, which were originally cleared on payment of duty. The Internal Audit Party noted this credit availing on documents other than invoices, leading to a show-cause notice proposing denial of credit amounting to ?2,77,986. The original authority confirmed the demand, which was upheld by the Commissioner(Appeals). The appellant contended that the denial was based on a procedural lapse as they failed to follow Rule 16 of the Central Excise Rules. The appellant argued that the goods were duty paid, and the denial was unjustified. The appellant also highlighted their compliance with Notification No.30/2004, exempting final products from duty if no CENVAT credit was availed on inputs.

2. Legal Arguments and Precedents:
The appellant's counsel argued that the denial of credit solely on procedural grounds was unsustainable, citing precedents like CCE Delhi-III vs. Golden Tobacco Mfg. co. Pvt. Ltd. The counsel emphasized that a substantive right of the assessee cannot be denied due to a procedural lapse. The show-cause notice did not mention non-compliance with Rule 16, focusing instead on availing credit on ineligible documents. The appellant maintained that they paid duty upon subsequent clearance of goods, and the credit availed on returned goods should not be disallowed as there was no revenue loss to the Department.

3. Judgment and Decision:
After hearing both sides and examining the records, the Judicial Member found that the denial of CENVAT credit was based on a procedural lapse, which is not a valid reason under the law. The Judicial Member noted that the goods were duty paid, and the appellant had paid duty upon clearance. Relying on the cited legal precedents, the Judicial Member concluded that the impugned order was unsustainable in law. Consequently, the appeal of the appellant was allowed, setting aside the decision of the Commissioner(Appeals).

This detailed analysis of the judgment highlights the key issues, legal arguments, precedents cited, and the final decision rendered by the Appellate Tribunal CESTAT Bangalore in favor of the appellant.