2022 (8) TMI 1051 - AT - Central Excise

Recovery of CENVAT Credit - contravention of rule 4(1) of CENVAT Credit Rules, 2004 by storing otherwise eligible inputs' at unregistered premises and without taking statutory permission mandated under rule 8 of CENVAT Credit Rules, 2004 for the period from 1st May 2010 to 31st January 2011 - HELD THAT - On the admitted facts, it is seen the disputed credit is attributable to inputs stored at premises that, though not included in the registration, was pending for approval of such inclusion. Considering that the approval was granted, and though belatedly, without any objections thereto, it is cause for wonderment that such delay was tolerated by the supervisory authority. It is also no less surprising that the officials engaged in EA 2000 Audit did not consider it necessary to ascertain the cause of such unalloyed breach of conditions; perhaps the nomenclature, permanently linked to its conception, is responsible for depriving it of the robustness that audit should be imbued with if it is to have continued relevance. The authority concerned would do well to give some thought to this. There is no allegation of mis-utilization of the input goods or that these were used for manufacture of non-entitled output goods. It is not found appropriate to uphold the impugned order in the light of the factual circumstances in which inputs were stored inappropriately - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over recovery under CENVAT Credit Rules, 2004 - Storage of inputs at unregistered premises without statutory permission - Eligibility for credit availed - Impugned order of Commissioner of Central Excise & Customs, Nagpur - Delay in approval for incorporation in central excise registration - EA 2000 Audit objection - Disputed credit attributable to stored inputs - Allegations of mis-utilization - Business exigency vs. bureaucratic inertia - Permission for storage of duty paid inputs outside factory premises - Tribunal decisions in similar cases.

Analysis:
In the present appeal, M/s Meegale Pneumatics Pvt Ltd challenges the recovery of &8377; 1,04,92,036 under rule 14 of CENVAT Credit Rules, 2004, along with penalties imposed by the Commissioner of Central Excise & Customs, Nagpur. The dispute arises from the appellant's storage of otherwise eligible 'inputs' at unregistered premises without the necessary statutory permission, rendering them ineligible for the credit availed during the period from 1st May 2010 to 31st January 2011. The appellant sought approval for incorporation of additional plots in their central excise registration, with delays and subsequent approvals leading to the impugned order for credit reversal.

The appellant's Counsel highlighted the delayed approval process for plot incorporation, emphasizing that the storage of inputs was not disputed, and they were utilized for manufacturing and clearance of output during the period in question. Reference was made to Tribunal decisions in similar cases to support the appellant's position. However, the Authorized Representative for the respondent argued that the impugned order correctly found the storage of inputs to be in violation of rules, justifying the denial of credit eligibility.

Upon detailed examination, the Tribunal noted that the disputed credit was associated with inputs stored at premises pending approval for inclusion in the registration. Despite the eventual approval without objections, the delay in processing the requests was criticized, questioning the oversight during the EA 2000 Audit. The Tribunal expressed surprise at the adjudicating Commissioner's handling of the matter, suggesting a lack of appreciation for the distinction between exemption conditions and credit scheme requirements.

Notably, there were no allegations of mis-utilization of input goods or unauthorized use for non-entitled output goods. The Tribunal referenced previous judgments emphasizing the permissibility of storing inputs outside factory premises due to business exigencies, cautioning against penalizing manufacturers for bureaucratic delays in granting permissions. Citing these precedents and considering the factual circumstances, the Tribunal concluded that the impugned order could not be upheld, ultimately setting it aside and allowing the appeal.

In light of the foregoing analysis and the Tribunal's findings, the impugned order for credit recovery and penalties under the CENVAT Credit Rules, 2004 was overturned, granting relief to the appellant based on the factual and legal considerations presented during the appeal proceedings.