Tribunal Upholds Denial of CENVAT Credit for Input Storage Violation

The tribunal dismissed the central excise appeal, upholding the denial of CENVAT credit of Rs.30,05,054 due to non-compliance with procedural requirements for storing inputs outside the factory premises without prior permission from the Commissioner. The questions of law were decided in favor of the revenue and against the appellant.

---

---

Issues Involved:
1. Justification of CENVAT credit of Rs.30,05,054 under Rule 57 (A) (B) (1).
2. Consistency in the tribunal's view regarding CENVAT credits of Rs.46,600 and Rs.30,05,054.
3. Requirement of prior permission from the Commissioner for storing inputs outside the factory premises.
4. Validity of the Show Cause Notice issued without prior permission from the Commissioner.

Issue-wise Detailed Analysis:

1. Justification of CENVAT credit of Rs.30,05,054 under Rule 57 (A) (B) (1):
The tribunal found that the CENVAT credit of Rs.30,05,054 was taken on inputs stored outside the factory premises without obtaining prior permission from the Commissioner, Central Excise, as required by the CBEC Circular dated 1.5.1996. The tribunal held that the credit could only be taken when such storage was made with prior permission and the goods were received inside the factory for manufacturing. Since the credit was taken while the inputs were still outside the factory, the tribunal allowed the revenue's appeal, denying the credit.

2. Consistency in the tribunal's view regarding CENVAT credits of Rs.46,600 and Rs.30,05,054:
The tribunal found inconsistency in the application of Rule 57 (A) (B) (1) for different amounts. For Rs.46,600, the credit was denied because the inputs were not found in the registered factory premises, although they were duty-paid and used in manufacturing. For Rs.30,05,054, the credit was denied due to non-compliance with procedural requirements, despite the inputs being used in manufacturing. The tribunal's decision was based on the procedural breach rather than the substantive use of inputs in manufacturing.

3. Requirement of prior permission from the Commissioner for storing inputs outside the factory premises:
The CBEC Circular dated 1.5.1996 required manufacturers to seek permission from the Jurisdictional Commissioner of Central Excise to store inputs outside the factory premises. The appellant had informed the Deputy Commissioner, Central Excise, about the storage due to space shortage but did not seek permission from the Commissioner. The tribunal upheld that the procedural requirement of obtaining permission was mandatory and the credit was rightly denied due to non-compliance.

4. Validity of the Show Cause Notice issued without prior permission from the Commissioner:
The tribunal found that the Deputy Commissioner issued a Show Cause Notice after returning the application for permission, which was not considered proper. The Commissioner (Appeals) had allowed the credit, considering it an irregularity without allegations of misuse of inputs. However, the tribunal emphasized strict compliance with procedural requirements and upheld the denial of credit due to the lack of permission from the Commissioner.

Conclusion:
The tribunal dismissed the central excise appeal, upholding the denial of CENVAT credit of Rs.30,05,054 due to non-compliance with procedural requirements for storing inputs outside the factory premises without prior permission from the Commissioner. The questions of law were decided in favor of the revenue and against the appellant.

---