2025 (2) TMI 555 - AT - Central Excise

Denial of CENVAT Credit - input services - Goods Transport by Road (Freight Inward) - Manpower Recruitment or Supply Agency service - Business Support Service - recovery with interest and penalty - HELD THAT - It is observed that the appellant has reversed the credit involved on the exempted products and have also paid the interest due. The fact that the excess availed is only Rs 4, 03, 509/- has not been contested by the Ld. Original Authority. He however felt that the proper procedure had not been followed and demanded the amount payable in terms of Rule 6(3)(i) of Cenvat Credit Rules 2004. The whole issue is procedural in nature and while the appellant was required to follow the prescribed procedure no act of deliberate deception with the design of securing an unfair advantage has been made out. This being so and considering that demand is disproportionately higher than the advantage if any gained by the appellant and which has subsequently been reversed along with interest the ends of justice would be met by confirming the credit reversed along with interest already paid and the dispute brought to a close. No purpose would be served in pursuing this low tax amount now that the Finance Act 1994 itself has been repealed. Conclusion - While acknowledging procedural lapses there are no deliberate deception by the appellant to gain an unfair advantage. In the peculiar facts and circumstances of the case consideration of justice and expediency requires that the impugned order be set aside and the credit reversed and interest already paid by the appellant be confirmed. Appeal disposed off.

Summary

The appeal was filed against an Order in Original passed by the Commissioner of Central Excise, Chennai, regarding the availing of CENVAT credit on certain input services by a manufacturer of computer stationery. The appellant had availed credit on various services used for manufacturing both dutiable and exempted goods, leading to a Show Cause Notice proposing recovery for clearances of exempted goods. The main issue revolved around the interpretation of Rule 6 of the CENVAT Credit Rules, 2004, concerning the maintenance of separate accounts for credit availed on exempted goods.The appellant argued that they had reversed the credit attributable to exempted goods and had the right to reverse such credit under Rule 6(3) of the CENVAT Credit Rules. They contended that the reversal of credit for input services was in order, citing a Supreme Court ruling that reversing credit before utilization amounted to not taking credit. The appellant highlighted the disproportionate demand compared to the benefit availed and argued against the imposition of penalties exceeding the loss suffered by the revenue.The Tribunal noted that the appellant had reversed the credit on exempted products and paid the interest due, with the excess availed being uncontested. While acknowledging procedural lapses, the Tribunal found no deliberate deception by the appellant to gain an unfair advantage. Considering that the demand was significantly higher than the benefit gained and subsequently reversed, the Tribunal emphasized the importance of substantial justice over procedural violations. Citing a Supreme Court case, the Tribunal emphasized the need to seek the truth in disputes and leaned towards confirming the credit reversed along with interest paid, bringing the dispute to a close. The Tribunal set aside the impugned order and confirmed the credit reversal and interest payment by the appellant, granting any consequential relief as per law.In conclusion, the Tribunal held that in the interest of justice and expediency, the appellant's appeal was allowed, and the credit reversal along with interest payment was confirmed, with the appellant eligible for any consequential relief as per law.