2016 (12) TMI 1211 - AT - Central Excise

Tribunal decision: Cenvat demand upheld, scrap issue remanded, interest & penalty set aside, appeal allowed

The Tribunal upheld the cenvat demand related to cylinder valves, remanded the issue of scrap and discarded goods for verification, set aside the interest ... Reversal of cenvat credit on removal of inputs - Reversal of cenvat credit on removal of capital goods/scrap - Interest as compensatory and requirement of loss to Revenue - Separation of dealer transactions from manufacturer stock for cenvat admissibility - Remand for verification of original documents and recordsReversal of cenvat credit on removal of inputs - Cenvat demand confirmed for non-reversal of credit on removal of cylinder valves. - HELD THAT: - The appellant claimed that the cylinder valves removed during the disputed period had been procured earlier (2007-2008) and no cenvat credit had been taken at that time. No documentary proof was produced before the authorities to establish that the cleared valves were procured prior to the disputed period and that no Modvat/Cenvat credit had been availed. In the absence of such evidence at the original stage, the Tribunal did not accept the appellant's contention and sustained the demand and penalty as confirmed by the adjudicating authority. [Paras 6]Cenvat demand of Rs. 1,37,378/- confirmed against the appellant is upheld along with applicable interest and penalty.Reversal of cenvat credit on removal of capital goods/scrap - Remand for verification of original documents and records - Admissibility of cenvat benefit on scrap/discarded capital goods removed on closure of factory is remanded for verification. - HELD THAT: - The appellant produced bills of entry/invoices before the Tribunal to show that the original capital goods were procured in 1993-94 and no Modvat/Cenvat credit had been availed. Those documents were not produced before the original authority, and the Tribunal held that such documents require verification at the original stage. Consequently, the matter is remanded to the original authority to verify the records; if satisfied, the authority should allow the cenvat benefit and drop the duty demand. [Paras 7, 10]Matter remanded to the original authority for verification of duty paid documents and records regarding availment of Modvat/Cenvat on the initially procured capital goods removed as waste/scrap.Interest as compensatory and requirement of loss to Revenue - Confirmation of interest and penalty for delayed reversal of cenvat credit set aside. - HELD THAT: - The appellant demonstrated that sufficient balances were available in its Cenvat account to cover the amounts, and the Tribunal accepted that there was no loss to the revenue. Since interest is compensatory, and no revenue loss was shown, confirmation of interest and the nominal penalty was held to be not proper or justified; the appeal on this point was allowed. [Paras 8, 10]Confirmation of interest of Rs. 2,26,704/- and penalty of Rs. 500/- is set aside; appeal allowed on this ground.Separation of dealer transactions from manufacturer stock for cenvat admissibility - Cenvat demand and penalty for credit passed on to customers under invoices issued in the capacity of a first stage dealer disallowed. - HELD THAT: - The appellant was registered both as a manufacturer and as a first stage dealer. The invoices in question were issued under the dealer registration and related to goods sold from dealer stock, which were not co relatable with goods manufactured by the appellant. The Tribunal held that credit attributable to dealer transactions cannot be disallowed by treating them as manufacturing unit transactions, and therefore the demand and equal penalty were unsustainable. [Paras 9, 10]Cenvat demand of Rs. 50,207/- and the imposition of equal penalty in respect of dealer invoices is not sustainable; appeal allowed on this ground.Final Conclusion: Appeals disposed: demand relating to cylinder valves upheld; matter remanded for verification of documents on scrap/discarded capital goods; interest and nominal penalty for delayed reversal set aside; demand and penalty relating to dealer invoices quashed. Issues:1. Non-reversal of Cenvat credit on cylinder valves2. Non-reversal of cenvat credit on scrap and discarded capital goods3. Delayed reversal of cenvat credit4. Passing of cenvat credit to customers under dealer invoicesAnalysis:1. Non-reversal of Cenvat credit on cylinder valves:The appellant argued that no cenvat credit was taken on the cylinder valves procured in 2007-2008, hence no reversal was required. However, as no evidence was presented to prove this claim, the Tribunal upheld the cenvat demand of Rs. 1,37,378 along with interest and penalty.2. Non-reversal of cenvat credit on scrap and discarded capital goods:The appellant contended that no cenvat credit was availed on the capital goods procured in 1993-94, thus no reversal was necessary when removed as scrap. The Tribunal found merit in this argument and remanded the matter to the Original Authority for verification of documents. If verified, the duty demand will be dropped.3. Delayed reversal of cenvat credit:The appellant demonstrated that they had sufficient balance to cover the confirmed cenvat amount, indicating no loss to the Government. As interest is compensatory and no revenue loss occurred, the Tribunal set aside the interest amount of Rs. 2,26,704 and penalty of Rs. 500.4. Passing of cenvat credit to customers under dealer invoices:The appellant, registered as both a manufacturer and first stage dealer, issued invoices under the dealer registration. The Tribunal ruled that since the goods sold were not related to the manufactured goods, disallowing the cenvat credit on dealer invoices was unjustified. The demand of Rs. 50,207 and penalty were deemed unsustainable.In conclusion, the Tribunal upheld the cenvat demand related to cylinder valves, remanded the issue of scrap and discarded goods for verification, set aside the interest amount and penalty for delayed reversal, and allowed the appeal on passing cenvat credit under dealer invoices.