2017 (7) TMI 331 - AT - Central Excise

Revenue's appeal on CENVAT credit demand dismissal upheld by CESTAT - Lack of stock possession presumption

Commissioner of Central Excise Mumbai-I Versus Kennington Fabrics Pvt. Ltd.

The appeal filed by the Revenue against the order setting aside the demand of CENVAT credit availed and penalty imposed was dismissed by the Appellate ... CENVAT credit - omission of rule 12B of Central Excise Rules, 2002 - it is alleged that the appellant, though no longer entitled to the facility of credit, continued to do so even after the deletion of the said rule and hence was determined as being liable to the duties and penalties as ordered by the original authority - Held that: - we find no flaw in the contention of Revenue that the credit lying in balance after adjustment of the duty on the unsold stock would no longer be available to the respondent - it is also seen that there is no evidence that the respondent had utilised credit after 9th July 2004. Indeed, it is inconceivable that this should have been so for the claim of the respondent to have become a manufacturer in its own right is based on acquisition of a production facility at Bhiwandi which is in a different Central Excise jurisdiction and it would have been impossible for that unit to escape payment of duties on clearance - The determination of duty liability is therefore without authority of law and liable to set aside - penalty also set aside - appeal dismissed - decided against Revenue. Issues:1. Appeal against order setting aside demand of CENVAT credit availed/utilised and penalty imposed.2. Dispute regarding the deletion of rule 12B of Central Excise Rules, 2002.3. Allegation of continuing to avail CENVAT credit after rule deletion.4. Examination of evidence of credit utilization post rule deletion.5. Presumption of credit utilization without possession of stock.6. Lack of authority for determining duty liability, interest, and penalty.Analysis:1. The appeal was filed by the Revenue against the order setting aside the demand of CENVAT credit availed/utilised and the penalty imposed by the original authority. The Commissioner of Central Excise (Appeals) Mumbai had set aside the order confirming the demand of &8377; 18,61,362, interest, and penalty under relevant rules. The appellant, M/s Kennington Fabrics Pvt Ltd, was alleged to have continued availing the credit even after the deletion of rule 12B of Central Excise Rules, 2002.2. The genesis of the dispute lies in the deletion of rule 12B of Central Excise Rules, 2002, with effect from 9th July 2004. Prior to this, purchasers of raw materials for supply to job workers were entitled to CENVAT credit. The appellant was accused of availing the credit post the rule deletion, leading to the demand and penalty. The first appellate authority held a different view on the matter.3. During the hearing, the Revenue contended that the credit balance after adjusting duty on unsold stock would no longer be available to the respondent. However, there was no evidence of the respondent utilizing credit after 9th July 2004. The original authority presumed credit utilization without possession of stock for clearance, leading to the duty liability determination, interest, and penalty imposition.4. The Tribunal found no flaw in the Revenue's contention regarding the unavailability of credit balance post adjustment. However, without evidence of credit utilization post rule deletion, the presumption made by the original authority was deemed unfounded. The respondent's claim of becoming a manufacturer was based on acquiring a production facility in a different jurisdiction, making it unlikely for them to escape duty payment on clearance.5. The Tribunal concluded that the original authority's presumption of credit utilization without possession of stock was unjustified. As a result, the determination of duty liability, interest, and penalty lacked legal authority and was set aside. The appeal was ultimately dismissed on these grounds.6. The judgment was pronounced on 26/05/2017 by Shri C J Mathew, Member (Technical), at the Appellate Tribunal CESTAT MUMBAI, as per the citation 2017 (7) TMI 331.