2019 (2) TMI 940 - AT - Central Excise

CENVAT Credit - inputs utilized in the manufacture of Plain Lateral Pipes and Tubes - classification of pipes and tubes - Held that - Revenue is silent about the duty paid by the appellant on the said Plain Lateral Pipes and Tubes. Admittedly the said duty stands paid by them by utilizing the credit, which gets reversed at the time of payment of duty. In such circumstances the further reversal of the credit cannot be sought by the Revenue. If the Revenue was of the view that the said Pipes and Tubes were also exempted, and the appellant is not entitled to avail the credit, then the duty paid by the appellant on their final product was required to be refunded to them or to be adjusted or neutralized against the demand of credit being made. As such, the entire situation is revenue neutral - demand set aside. Demand of interest and penalty - Held that - here is no dispute about the fact that the wrongly availed credit was not being used by the assessee inasmuch as there was sufficient balance in their credit account at the time of reversal of the excess availed credit. The Hon ble Karnataka High Court in the above-referred judgement of Bill Forge (P) Ltd. 2011 (4) TMI 969 - KARNATAKA HIGH COURT has held that in case the excess and wrongly availed Cenvat credit does not stand utilized, and is subsequently reversed, the same would not call for any interest liability. Interest set aside - Revenue has also not advanced any evidence to the contrary to show that such credit was being availed with a mala fide intention. The demand also stands raised by invoking the longer period of limitation. However, as the appellant is not disputing the said payment by them by reversing the credit, we, while upholding the said demand, set aside the penalty imposed upon the appellant. Demand upheld - interest and penalty set aside - appeal allowed in part.

Summary

Issues Involved:
1. Availment of Cenvat credit on inputs for manufacturing Plain Lateral Pipes and Tubes.
2. Payment of interest and imposition of penalty on the appellant.

Issue 1: Availment of Cenvat Credit on Inputs for Manufacturing Plain Lateral Pipes and Tubes:
The appellant was engaged in manufacturing various items, including LLDPE/HDPE Plain Lateral Pipe & Tubes and HDPE coupled Sprinkler Pipes and Drip Irrigation Emitting Pipes. The dispute arose regarding the classification and duty payment on these goods. The audit objected to the appellant availing Cenvat credit on inputs exclusively used in manufacturing exempted goods. The original adjudicating authority held that Plain Lateral Pipes were dutiable under chapter 39, while Drip Irrigation Pipes were exempted. The Revenue contended that Plain Lateral Pipes should be classified under chapter 84 and be exempted from duty. The Commissioner(Appeals) upheld the Revenue's appeal, leading to the present appeal. The Tribunal noted that the appellant paid duty on Plain Lateral Pipes treating them as classifiable under chapter 39. Regardless of the classification, the Tribunal held that the credit availed by the appellant for duty payment cannot be disallowed. The Tribunal found the situation to be revenue-neutral, as the duty paid exceeded the credit availed. Consequently, the order upholding the demand for duty was set aside.

Issue 2: Payment of Interest and Imposition of Penalty:
The second issue focused on the payment of interest and penalty. The appellant, after availing Cenvat credit on common inputs, cleared exempted products by paying a percentage of the value. The Revenue objected to the appellant availing credit on inputs exclusively used for exempted products. The appellant reversed the disputed credit before the show cause notice. The Tribunal noted that the wrongly availed credit was not utilized and was reversed promptly. Citing a Karnataka High Court judgment, the Tribunal ruled that no interest liability arises if the excess credit is reversed promptly. Regarding the penalty, the Tribunal found no malafide intent in the appellant's actions, as they believed they were entitled to the credit. As the appellant reversed the credit and filed due returns, the penalty was set aside. Ultimately, the demand for duty was partially upheld, while interest and penalty on that count were set aside.

In conclusion, the Tribunal set aside the demand for a certain amount but upheld another demand. However, the interest and penalty imposed were set aside. The appeal was disposed of accordingly.