2013 (10) TMI 404 - AT - Central Excise

Appellant's Incorrect CENVAT Credit Leads to Dispute

The appellant incorrectly availed CENVAT credit on capital goods, leading to a dispute over the inadmissibility of the credit. The case involved ... CENVAT Credit on Capital Goods - 100% credit availed in the first year – Waiver of Pre-deposit – Held that:- The appellant has taken credit on capital goods wrongly, which was not due to them in the first year, the appellant is liable to pay interest on such credit wrongly availed from the date of taking of the credit till the end of the financial year - the interest liability would be approximately Rs.3.25 lakhs - on the wrongly availed credit of Rs.14.42 lakhs, the interest liability would be approximately Rs. 3 lakhs - the appellant was liable to make pre-deposit of Rs.6.25 lakhs – upon such submission pre-deposit of balance of dues against the appellant shall stand waived till the disposal – Partial Stay granted. Issues:1. Availing CENVAT credit on capital goods incorrectly.2. Disputing the inadmissibility of the credit.3. Allegation of suppression and time-barring of the demand.4. Liability for interest on wrongly availed credit.5. Pre-deposit amount determination and stay of recovery during appeal.Issue 1: Availing CENVAT credit on capital goods incorrectly:The appellant, M/s Hindustan Petroleum Corporation Ltd., availed CENVAT credit on capital goods for 100% of the duty paid in the first year, contrary to the CENVAT Credit Rules allowing only 50% credit in the first year. The appellant also took CENVAT credit amounting to Rs.14,42,690/- on various items, which they later reversed. The Show Cause Notice invoked the extended period of time and confirmed demands by denying 50% of the credit and the Rs.14.42 lakhs credit taken incorrectly.Issue 2: Disputing the inadmissibility of the credit:The appellant acknowledged the incorrect availing of CENVAT credit on capital goods but argued they were eligible to take the balance 50% credit in the subsequent year. They contested only Rs.8900/- of the Rs.14.42 lakhs credit, pertaining to welding rods used for repair and maintenance. The appellant claimed the entire demand was time-barred due to being a Public Sector Undertaking (PSU) where suppression cannot be alleged.Issue 3: Allegation of suppression and time-barring of the demand:The appellant's counsel argued that as a PSU, suppression cannot be alleged, and therefore, the entire demand should be considered time-barred. The appellant maintained that their liability was limited to interest on 50% of the credit taken in advance.Issue 4: Liability for interest on wrongly availed credit:Both parties agreed that the appellant was liable to pay interest on the wrongly availed credit. The Revenue's representative acknowledged that only interest on 50% of the capital goods credit taken in the first year should be recovered. The appellant was directed to make a pre-deposit of Rs.6.25 lakhs, with interest liabilities estimated at approximately Rs.3.25 lakhs and Rs.3 lakhs for the different credit amounts.Issue 5: Pre-deposit amount determination and stay of recovery during appeal:The Tribunal directed the appellant to make a pre-deposit of Rs.6.25 lakhs within four weeks, with compliance due by October 4, 2013. Upon this pre-deposit, the balance of dues adjudged against the appellant would be waived, and recovery stayed during the appeal process.This comprehensive analysis of the judgment addresses the issues surrounding the incorrect availing of CENVAT credit, dispute over inadmissibility, allegations of suppression and time-barring, determination of interest liabilities, and the pre-deposit amount set by the Tribunal for the appeal process.