2008 (3) TMI 589 - Commissioner - Central Excise

Manufacturer wins appeal for denied Cenvat credit & penalties overturned

The Commissioner allowed the appeal, ruling in favor of the appellant, a manufacturer of organic chemicals, regarding the denial of Cenvat credit ... Cenvat/Modvat - Inputs - Demand - Limitation - Suppression of facts Issues:- Denial of Cenvat credit to the appellant- Invocation of extended period and imposition of penaltyDenial of Cenvat Credit:The appeal revolves around the denial of Cenvat credit amounting to Rs. 1,66,098 to the appellant, a manufacturer of organic chemicals. The appellant contended that the duty paid and specified in the invoices should not be denied. They argued that the department lacked legal basis to deny the credit, especially since there was no refund of duty alleged to have been paid on the goods by the supplier, Cipla Ltd. The appellant cited various legal principles and precedents to support their claim that credit cannot be denied without valid reasons. The Commissioner analyzed the circumstances and legal provisions, ultimately concluding that none of the mentioned circumstances warranted the denial of credit. The Commissioner also highlighted the appellant's rights to take credit of duty paid on inputs without conditions, emphasizing that the department cannot reopen the assessment at the receiver's end without proper legal grounds.Invocation of Extended Period and Penalty:The impugned order invoked the extended period and imposed an equal penalty under Rule 13(2) based on the allegation of suppression by the appellant regarding the credit taken during a specific period. The appellant argued that they had taken credit based on the duty paid by the supplier in good faith, without any intent to evade duty payment. They maintained that the duty paid by the supplier was retained by the government, and they had no obligation to inform the department about any excess duty paid by the supplier. The Commissioner agreed with the appellant's arguments, stating that the extended period cannot be invoked in the absence of wrongful acts or suppression with intent to evade duty. As the appellant's actions were within the legal framework and supported by relevant legal precedents, the Commissioner set aside the impugned order, ruling in favor of the appellant and rejecting the imposition of penalty and interest.In conclusion, the Commissioner allowed the appeal, emphasizing that the denial of Cenvat credit was not justified, and the invocation of the extended period and penalty were unwarranted based on the appellant's compliance with legal provisions and precedents.