2019 (6) TMI 943 - AT - Central Excise

Tribunal overturns credit denial based on photocopies, emphasizes substance over procedure

The Tribunal set aside the order denying CENVAT credit based on photocopies of the Bill of Entry, remanding the case for verification. It held that denial ... CENVAT credit - duty paying documents - credit availed on the basis of photocopies of the Bill of Entry - not valid documents - Rule 9 (1) of CCR - HELD THAT:- In the present case, the receipt of the inputs and duty paid on the inputs was used in the manufacture of the final product is not in dispute and the Department could have verified all these documents from their record. The Division Bench of the Delhi Tribunal in the case of CENTURY METAL RECYCLING PVT. LTD. VERSUS CGST, CCE, ALWAR [2018 (7) TMI 984 - CESTAT NEW DELHI] on an identical issue has held that As long as the input is received in the factory of the production and used for the manufacture of excisable goods, there should not be any bar in taking Cenvat credit under Rule 9 thereof which is substantial benefit and not to be denied on account and procedural ground. In various decisions, it has been consistently held that CENVAT credit can be taken on the photocopy of the Bill of Entry provided other requirement with respect to receipt of input into the factory, duty paid character inputs and their use is not in dispute - Further, the appellant has submitted the various documents to prove the receipt of its usage but the same has not been considered and CENVAT credit has been denied merely on the ground that photocopy of the Bill of Entry is not the proper document. Case remanded to the original authority only for the purpose of verification of the documents relating to its receipt and usage of the inputs - appeal allowed by way of remand. Issues:- Denial of CENVAT credit based on photocopies of Bill of Entry- Interpretation of Rule 9 of CENVAT Credit Rules, 2004- Applicability of judicial precedents- Procedural lapses in availing CENVAT creditAnalysis:The appeal challenged an order rejecting the appellant's appeal against the denial of CENVAT credit by the Commissioner (Appeals). The appellants, manufacturers of excisable goods, had availed credit based on photocopies of the Bill of Entry, leading to a show cause notice for recovery of irregularly availed credit, interest, and penalty. The original authority confirmed the demand, interest, and imposed a penalty. The appellant contended that the denial of credit on photocopies was unsustainable, citing judicial precedents and arguing that the activity undertaken amounted to 'manufacture' under relevant provisions. The appellant emphasized that the duty-paid nature of goods and their use were not in dispute, supporting their claim with documents. The appellant also argued that Rule 9 of the CENVAT Credit Rules did not prohibit availing credit based on photocopies.The appellant relied on various decisions to support their arguments, emphasizing that CENVAT credit should not be denied on procedural grounds. The appellant referred to a circular stating that denial of credit should not be based solely on procedural lapses without proper verification of duty-paid character and intended use of goods. The respondent defended the impugned order, asserting that photocopies of the Bill of Entry were not valid documents for credit under Rule 9. The respondent highlighted the absence of an FIR for lost original documents as a reason for denying credit based on photocopies.Upon considering submissions, the Tribunal found that the denial of credit solely based on photocopies was not sustainable. Citing a relevant decision, the Tribunal emphasized that as long as inputs were received and used in manufacturing excisable goods, credit should not be denied on procedural grounds. The Tribunal concluded that the appellant was entitled to credit based on photocopies, remanding the case for verification of documents related to input receipt and usage. The Tribunal held that denial of credit for procedural lapses was not valid, allowing the appeal by remand.In the operative portion of the order pronounced on 17/06/2019, the Tribunal set aside the impugned order and remanded the case for verification, affirming the appellant's entitlement to CENVAT credit based on photocopies of the Bill of Entry.