2017 (10) TMI 332 - AT - Central Excise

Tribunal overturns Commissioner's order on CENVAT credit, emphasizing manufacturer's rights.

M/s. MPS Steel Castings (P) Ltd Versus Commissioner of Central Excise, Customs and Service Tax

The Tribunal allowed the appeal and set aside the Commissioner's order on ineligible CENVAT credit utilization and penalty imposition. The decision ... CENVAT credit - inputs and capital goods - It was alleged that the appellant had taken ineligible credit on the inputs purchased from M/s. Innovative Ventures Pvt. Ltd., Doddaballapur, Bangalore during the months of July 2008 and August, 2008, on which duty had not been discharged by M/s. Innovative Ventures Pvt. Ltd - reversal of credit alongwith interest - Held that: - CENVAT credit cannot be denied to the manufacturers on the ground that the supplier has not paid the duty - Board Circular No.766/82/2003-CE dated 15.12.2003 also cleared the same - reliance placed in the case of CCE, Jaipur Versus M/s. Aditya Industries and others [2014 (2) TMI 7 - CESTAT NEW DELHI] - appeal allowed - decided in favor of appellant. Issues:Appeal against Commissioner's order on ineligible CENVAT credit utilization and penalty imposition under CCR.Analysis:The appeal challenged an order by the Commissioner (A) regarding the appellant's alleged utilization of ineligible CENVAT credit and the subsequent demand for recovery, interest, and penalty. The appellant, a manufacturer of MS ingots, was accused of taking ineligible credit on inputs from a company that had not paid Central Excise duty due to closure and absconding directors. The original authority confirmed the demand and penalty, which was later upheld by the Commissioner (A) except for dropping the penalty. The appellant contended that the impugned order did not follow Circular No.766/82/2003-CE and contradicted established judicial precedents. The appellant cited various decisions supporting the position that credit cannot be denied based on the supplier's duty payment status.The appellant argued that the show-cause notice invoked a larger limitation period without evidence of fraud or suppression. Referring to the RS Industries case, the appellant emphasized the importance of invoices showing duty payment particulars for allowing credit. The Division Bench in the cited case had ruled that if goods were received under valid invoices, credit could not be denied even if the supplier had issues. The Tribunal's decision was upheld by the Delhi High Court. The appellant relied on this and other judgments to support the claim that credit denial based on the supplier's duty payment status was incorrect.Ultimately, the Tribunal, following the precedents cited by the appellant, allowed the appeal and set aside the impugned order. The decision was based on the consistent legal position that manufacturers should not be penalized for the supplier's duty payment defaults, as supported by relevant Circulars and judicial precedents. The Tribunal's ruling provided consequential relief to the appellant, highlighting the importance of established legal principles in determining CENVAT credit eligibility.