Commissioner demands repayment of Cenvat credit for non-dutiable goods; Tribunal rules in favor of appellant

The Commissioner confirmed Cenvat credit but demanded an equal amount under Section 11D, imposed penalty under Section 13, and interest under Section 11AB. The appellant used the credit for duty on galvanized strips, later deemed non-dutiable. The Commissioner argued against the credit due to the final product's non-dutiable status. However, the Tribunal found the demand under Section 11D untenable, as the appellant had already paid the duty collected from buyers to the Government, leading to the appeal being allowed.

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Issues involved: Confirmation of Cenvat credit under Section 11A(2), demand under Section 11D, penalty under Section 13 of Cenvat Credit Rules, interest under Section 11AB.

Confirmation of Cenvat credit under Section 11A(2): The Commissioner confirmed an amount of Cenvat credit and demanded an equal amount under Section 11D, imposed penalty under Section 13, and demanded interest under Section 11AB. The appellant, a manufacturer of CRCA galvanized strips, used the Cenvat credit while discharging duty on the galvanized strips. However, it was later held that galvanization of strips does not amount to manufacture, making the final product non-dutiable. The Commissioner contended that the appellant should not have taken Cenvat credit on duty paid inputs due to the non-dutiable status of the final product.

Demand under Section 11D: The Commissioner demanded the amount involved in the credit taken under Section 11D of the Central Excise Act, which requires an assessee who collected duty to pay it to the Government. However, the Tribunal referred to a previous case where it was held that the demand for reversal of credit is not tenable if the assessee was not seeking a refund of duty and had already paid the duty collected from buyers to the Government. The Tribunal found the demand for duty under Section 11D equally untenable in this case, as there was nothing further left to demand from the appellant. Consequently, the appeal was allowed.

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