2015 (10) TMI 1788 - AT - Central Excise

Interpretation of CENVAT Credit Rules Proviso in Appeals

The appeals centered on the interpretation of the proviso to Rule 3(7)(a) of CENVAT Credit Rules 2004, concerning the restriction of CENVAT credit for ... Demand of excess availed CENVAT credit -Imposition of penalty - Held that:- in respect of two demands, suppression has been invoked and submits that appellant is a big manufacturer registered with LTU and paying crores of duty in revenue and would not be resorting to avail excess CENVAT credit running into a few lakhs and therefore even if credit has been availed more than what was availed it was basically a calculation mistake or an error of understanding of the provisions and therefore mandatory penalty could not have been imposed. He agrees that appellant has no problem in paying the differential amount if on remand it is found that CENVAT credit taken as per the formula is more than the CVD payable. I find myself in agreement with the submission that what is involved is application of formula and the very fact that disputes have arisen in respect of this formula would show that there can be mistakes that may be made by the employees who take credit. When I look at the amount involved in three appeals and the size of the appellant, the submissions are acceptable. In view of the fact that appellant has volunteered to pay the amount of differential credit if it is found that they are liable to pay as per the decision taken in these appeals, the penalties imposed on the appellant are set aside. - Decided partly in favour of assessee. Issues:1. Interpretation of the proviso to Rule 3(7)(a) of CENVAT Credit Rules 2004 regarding the restriction of CENVAT credit for inputs procured from 100% EOU.2. Calculation of CENVAT credit based on the formula involving BCD and CVD rates.3. Application of the correct formula for availing CENVAT credit.4. Verification of CVD paid against the amount admissible as per the formula.5. Imposition of penalties for availing excess CENVAT credit.Analysis:1. The appeals involved a common issue of the demand for excess availed CENVAT credit concerning inputs received from 100% EOU during the material periods. The dispute centered around the interpretation of the proviso to Rule 3(7)(a) of CENVAT Credit Rules 2004, which restricted the CENVAT credit for a DTA unit in relation to inputs procured from 100% EOU.2. The Revenue contended that the BCD in the formula for calculating CENVAT credit represented the basic customs duty actually paid by the 100% EOU, while the appellant argued that it should denote the BCD leviable on like goods if imported into India. The appellant's calculation of CENVAT credit based on their interpretation resulted in a higher credit amount than what the Revenue deemed permissible.3. The judge referred to a previous order in the case of S.V. Sales Corporation to determine the correct formula for availing CENVAT credit. It was noted that the correct formula had been indicated in the earlier order, and since the appellants had adopted this formula for availing credit, the judge allowed the appeals based on the correctness of the formula.4. Regarding the verification of CVD paid against the admissible amount as per the formula, the matter was remanded to ensure that the credit was restricted to the quantum of CVD if the CVD paid was less than the permissible amount.5. The issue of penalties for availing excess CENVAT credit was addressed by considering the appellant's size and compliance history. It was acknowledged that mistakes could occur in applying the formula, and the appellant's willingness to pay the differential amount if found liable was taken into account. Consequently, the penalties imposed on the appellant were set aside due to the understanding that the discrepancies were likely due to calculation errors rather than intentional misconduct.