2024 (10) TMI 379 - AT - Central Excise

Manufacturer's CENVAT credit on undeclared raw materials remanded for verification of credit reversal claims

CESTAT DELHI held that a manufacturer incorrectly availed CENVAT credit on Aluminium Rod, Aluminium Wire, and PVC Compound during 2015-18, which were not ... Availment of CENVAT credit on the goods which are not inputs and the same have been cleared as such - goods having relationship whatsoever with the manufacture of the appellant's final products or not - recovery with interest and penalty - extended period of limitation - levy of penalty - HELD THAT:- A manufacturer is permitted to avail credit of the duty paid on inputs, which are used in the manufacture of final product. In the instant case, it is noted that the appellant had availed credit on Aluminium Rod (Chapter 76), Aluminium Wire (Chapter 76) and PVC Compound (Chapter 39) during the Financial Year 2015-16, 2016-17 and 2017-18 (upto June, 2017). As the said goods were not inputs, the appellant was not eligible to avail the credit of the duty paid on such inputs - the impugned order has noted that Aluminium Wire, Aluminium Rods and PVC Compound was not declared as raw materials in Form B of the Central Excise Registration of the appellant - the appellant had incorrectly availed the credit of duty on goods which were not inputs for their final product. The appellant should be given the opportunity to present all documentary evidences to substantiate their claim of having reversed the Cenvat Credit at the time of clearance of the Aluminium Rod, Aluminium Wire and PVC Compound at the time of clearance as such before the adjudicating authority, who will decide the matter afresh. It is noted that the appellant has claimed that they have paid the interest liable for the period from the date of availment to the date of reversal. The impugned order has already appropriated the said interest amount. However, liberty is given to the appellant to produce documents and establish the correctness of the said interest amount paid and so appropriated. The impugned order is set aside - appeal allowed by way of remand. Issues Involved:1. Incorrect availment of Cenvat Credit on non-input goods.2. Demand of Rs. 5,25,67,213/- along with interest and penalty.3. Allegation of suppression of facts and invocation of the extended period of limitation.4. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.Detailed Analysis:1. Incorrect Availment of Cenvat Credit on Non-Input Goods:The appellant, M/s K. S. Infra Transmission Private Limited, was accused of wrongly availing Cenvat Credit on goods such as Aluminium Rod, Aluminium Wire, and PVC Compound, which were not inputs for their final products, General Fabrication and Transformer Tank, as per the Cenvat Credit Rules, 2004. The Tribunal noted that these goods were not declared as raw materials in the appellant's Central Excise Registration, thereby confirming the incorrect availment of credit. However, the appellant contended that these goods were cleared 'as such' on payment of duty equivalent to the credit availed, citing the legal precedent that once credit is reversed, it is as if it was never taken, as supported by the Supreme Court judgment in Chandrapur Magnet Wires (P) Ltd.2. Demand of Rs. 5,25,67,213/- Along with Interest and Penalty:The Commissioner confirmed the demand for Rs. 5,25,67,213/- along with interest and an equal amount of penalty, which was challenged by the appellant. The appellant argued that they had already reversed the credit and paid the interest, thus the demand was unsustainable. The Tribunal acknowledged the appellant's claim of credit reversal and held that the demand could not be sustained if the credit was indeed reversed at the time of clearance.3. Allegation of Suppression of Facts and Invocation of the Extended Period of Limitation:The Department alleged that the appellant suppressed facts to avail inadmissible credit, justifying the invocation of the extended period of limitation under Section 11A(4) of the Central Excise Act, 1944. The appellant countered this by asserting that all necessary information was disclosed in their monthly returns and that there was no intent to evade duty. The Tribunal noted the appellant's submission but emphasized the need for the appellant to present documentary evidence to support their claim of having reversed the credit.4. Imposition of Penalty under Section 11AC of the Central Excise Act, 1944:The penalty was imposed on the grounds of fraud, collusion, or willful misstatement. The appellant argued against the imposition of the penalty, citing a lack of suppression or intent to evade duty. The Tribunal, referencing the legal principle that if credit is reversed, the penalty cannot be levied, held that no penalty is leviable if the credit was indeed reversed.Conclusion:The Tribunal set aside the impugned order and remanded the case, allowing the appellant to present all necessary documentary evidence to substantiate their claim of credit reversal. The Tribunal also provided the appellant the opportunity to verify the correctness of the interest amount paid. The appeal was allowed by way of remand, with directions for the adjudicating authority to reconsider the matter in light of the judgments and evidence presented.