2019 (8) TMI 672 - AT - Central Excise

CENVAT Credit - destruction of goods by fire - packing materials destroyed by fire in the factory - HELD THAT - The Appellant had never stated the fact of having issued the packing material (goods in question) to the production floor prior to the proceedings before this Tribunal. I agree with the submissions made by the Ld. DR that factual submissions being made for the first time before the Tribunal cannot be entertained. The Tribunal being an Appellate Authority cannot be presented with different or additional set of facts as compared to the facts presented before the lower authorities. Therefore, it is not possible to test the veracity of the additional factual submissions of the Appellant at this stage. The Chartered Engineer s report and SAP records do not aid the case of the Appellant in view of the above reasons - the duty amount of which credit was availed before the fire incident in August 2011, has already been reversed in May 2015 which has been duly recorded in the impugned order on Page no 6. Therefore, the duty amount already stands paid by way of reversal of credit which is not in dispute. Demand of Interest and penalty - HELD THAT - The Ld. Commissioner has recorded that the Appellant had sufficient credit balance in its account. Based on the applicable provisions under Rule 14 of the CENVAT Credit Rules, as was in force during the period April 2012 to February 2015, the Appellant is not required to pay any interest. The Ld. Commissioner has committed a fundamental error in applying the said amended provisions since the same would apply in those cases where it is to be ascertained whether the credit is deemed to be utilized in March 2015 in respect of the credit amount availed in March 2015, i.e. both availment and utilization of credit during the period after the amendment took place. The aforesaid provisions brought into effect on 14th March, 2015 cannot be applied (retrospectively) for the credit amount already shown in the returns prior to March 2015 (i.e. August 2011 when the fire incident occurred). It is also relevant to take note of the above Allahabad High Court decision in CCE, Ghaziabad vs. Ashoka Metal Decor (P) Ltd. 2010 (4) TMI 738 - ALLAHABAD HIGH COURT wherein the Hon ble High Court held that when the wrong credit is not utilized for payment of final output duty on final products, neither the assessee gets any advantage nor there is any Revenue loss to the Government. Since the appellant had sufficient credit balances, in any case, there would be no loss of Revenue to the exchequer. Therefore, the imposition of interest and penalty in the present proceedings cannot sustain and hence, the same are set aside - Duty amount since already paid is not interfered with. Appeal allowed in part.

Summary

Issues Involved:
1. Availment of CENVAT Credit on packing materials destroyed by fire.
2. Requirement to reverse the CENVAT Credit.
3. Imposition of interest and penalty.

Detailed Analysis:

1. Availment of CENVAT Credit on Packing Materials Destroyed by Fire:
The Appellant, engaged in the manufacture of "Glass & Glassware," had taken CENVAT Credit on packing materials which were subsequently destroyed by fire. The Department argued that the Appellant took irregular credit of ?2,76,514/- as the packing materials were destroyed before being used in the manufacture of final goods. The Appellant contended that these materials were already issued to the production floor and thus qualified for CENVAT Credit under Rule 3 and Rule 2(k) of the Cenvat Credit Rules, 2004.

2. Requirement to Reverse the CENVAT Credit:
The Department issued a Show Cause Notice demanding the reversal of the CENVAT Credit. The Appellant argued that there was no requirement to reverse the credit as the materials were considered inputs for work-in-progress goods. However, the Tribunal noted that the Appellant introduced new factual submissions at the Tribunal level, which were not presented before the lower authorities. Consequently, the Tribunal could not verify these new facts and upheld the Department's demand for reversal of credit.

3. Imposition of Interest and Penalty:
The Tribunal examined whether interest and penalty were applicable. It was noted that the Appellant had sufficient credit balance in its account, and the duty amount had already been reversed before the issuance of the Show Cause Notice. The Tribunal referred to Rule 14 of the CENVAT Credit Rules and various judicial precedents, including CCE vs. Bill Forge Pvt Ltd., which clarified that interest is compensatory and applies only when there is a delay in payment of duty. Since the credit was reversed before utilization, no interest was payable for the period before March 2015. For the period from March 2015 to May 2015, the Tribunal found that the amended provisions of Rule 14 could not be applied retrospectively.

The Tribunal also cited decisions from the Karnataka High Court, Madras High Court, and Supreme Court, which held that interest and penalty are not applicable if the wrong credit is not utilized. Therefore, the Tribunal concluded that the imposition of interest and penalty was not justified and set them aside. The duty amount, already reversed, was not interfered with.

Conclusion:
The appeal was disposed of with the Tribunal setting aside the imposition of interest and penalty, while maintaining the reversal of the duty amount. The decision emphasized that the reversal of credit before utilization negates the need for interest and penalty, aligning with established judicial precedents.