2018 (5) TMI 1617 - AT - Central Excise

Reversal of CENVAT credit - recovery of ineligible credit passed on by declaring stocks in nonexistent premises and not existent stock - whether the appellants are required to pay back Cenvat Credit passed on as registered dealers or otherwise? - Held that - all the appellants were registered dealers were not manufactures; they had applied for and got provisional registration certificate as dealers; they had issued invoices as registered dealers during the period in question and that they had maintained the records in form RG 23 A instead of RG 23(D) - the provisions of Rule 12 of Cenvat Credit Rules 2002 as has been sought to be applied cannot be invoked against the appellants accordingly the question of confirming the demands raised does not arise - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether appellants are required to pay back Cenvat Credit passed on as registered dealers or otherwise.

Analysis:
The judgment pertains to three appeals against Order-in-Appeal No. RKA/84-86/SRT-I/2009 dated 27.02.2009. The core issue revolves around whether the appellants, registered dealers of man-made fabrics, are obligated to repay Cenvat Credit passed on to purchasers. The appellants were accused of availing Cenvat Credit on non-existent stock and premises, leading to Show Cause Notices for recovering ineligible credit. The adjudicating authority upheld the demands, penalties, and interest, which were subsequently affirmed by the 1st Appellate Authority. The appellants contended that they had appropriately debited the Cenvat Credit in their books and passed it on to purchasers, citing a previous tribunal decision. The Departmental representative supported the lower authorities' findings.

Upon thorough review, it was established that the appellants, being registered dealers and not manufacturers, were not subject to the provisions of Rule 12 of Cenvat Credit Rules 2002 for demanding wrongly availed credit. Rule 12 pertains to manufacturers, not traders like the appellants. Additionally, even if the appellants were required to repay the Cenvat Credit, the fact that they had debited the amount as registered dealers on invoices rendered the demand unsustainable. Citing legal precedents, including the High Tech Glow Mills case, the judgment concluded that the impugned orders were unsustainable. Consequently, the orders were set aside, and the appeals were allowed, with the operative part pronounced in court upon completion of the hearing.