1. Whether Cenvat Credit is admissible on the capital goods exclusively for exempted goods? 2.Whether Cenvat Credit admissible on the basis of endorsed invoice?

PJ/ Case Laws/2012-13/1271

CASE: - AJAY POLY PVT. LTD. V/S COMMISSIONER OF CENTRAL EXCISE, DELHI-I

CITATION: - 2011 (273) E.L.T 85 (TRI. - DELHI).

BRIEF FACTS:- The appellant are manufacturers of Barium Ferrite Powder and Ferrite Magnate chargeable to Central Excise Duty. Their head office is at Sadar Bazaar and their factory at Okhla and Faridabad. During April 2002 period, they received one consignment of capital goods dispatched to their Okhla unit by M/s. Greave Ltd., West Bengal, though the same was meant for Faridabad unit. The consignment was received in Okhla unit and initially they took Cenvat credit there but on realizing that the goods are not meant for Okhla unit and the same are meant for Faridabad unit, the entire consignment was transferred to Faridabad unit after reversing the Cenvat credit and endorsing the invoice in favour of Faridabad unit. On the basis of this endorsed invoice dated 30th April 2002, the Faridabad unit of the appellant took Cenvat credit of Rs. 7,280/-. In May 2002, the head office of the appellant company received some imported capital goods imported under bill of entry 339111 dated 18-5-02 involving additional customs duty of Rs. 1,07,116/- and from there the goods were transferred to Okhla unit which initially took the Cenvat credit but on realizing that the goods are not meant for Okhla unit, and are meant for Faridabad unit, same were transferred to Faridabad after reversing the Cenvat credit and making endorsement on the bill of entry in favour of Faridabad unit. The department was of the view the credit amounting to Rs. 1,18,396/- (Rs. 11,280/- + Rs. 1,07,116/-) on the basis of endorsed invoices/bill of entry is not correct. It was also found that the appellant during period April, June and August 2004 had received capital goods under five invoices on the basis of which Cenvat credit amounting to Rs. 1,09,695/- had been taken. However, during that period the appellant were clearing the goods at nil rate of duty on job work basis under job work challan by availing exemption under Notification No. 214/86-C.E.. The department, therefore, was of the view that since the capital goods in respect of which the credit of Rs. 1,09,695/- had been taken were being used exclusively for manufacture of exempted goods, in terms of the provision of Rule 6(4) of Cenvat Credit Rules, the appellants were not entitled for this credit. The above irregularities had been detected in course of audit of the records of the appellant. The extended period was invoked by alleging that the wrong availment of credit has happened due to willful suppression of facts on the part of the appellant. The show cause notice was adjudicated by the Assistant Commissioner vide order-in-original dated 30-10-07 by which the entire Cenvat credit demand was confirmed alongwith interest and beside this, penalty of equal amount i.e. Rs. 2,28,091/- was imposed on them under Section 11AC of the Central Excise Act. On appeal to Commissioner (Appeals), the Assistant Commissioner’s order was upheld vide order-in-appeal dated 18-3-09. Against this order of the Commissioner (Appeals), the present appeal has been filed.

APPELLANTS CONTENTION:- Appellant contended that the Cenvat credit on capital goods wrongly taken by the Okhla unit was duly reversed and endorsed to Faridabad unit in specified format as soon as it came into their notice. Therefore there is no denial of Cenvat credit amounting to Rs 118396. They also contended that credit utilized on the 5 invoices amounting to Rs 107116 which was utilized in the manufacture of capital goods were used for manufacture of goods on job work, which were cleared at nil rate of duty under job work challans under exemption Notification No. 214/86-C.E., those goods cannot be called exempted goods as the same had been cleared by their owners on payment of duty and, hence, the provision of Rule 6(4) of Cenvat Credit Rules are not applicable.

RESPONDENTS CONTENTION:- The learned Departmental Representative defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that so far as the capital goods involving Cenvat credit of Rs. 1,09,695/- are concerned, the same during the period of dispute were exclusively cleared for the manufacture of the goods which were exempted goods for the reason that the same were being cleared at nil rate of duty by availing duty exemption under Notification No. 214/86-C.E., that Notification No. 214/86-C.E. is just like any other exemption notification and goods cleared by availing full duty exemption under Notification No. 214/86-C.E. have to be treated as exempted goods within the meaning of this term, as defined in the Cenvat Credit Rules. They further contended that as regards the Cenvat credit of Rs. 1,18,396/- under an endorsed bill of entryand endorsed invoice, the same are not valid documents and, hence, the Cenvat credit had been wrongly taken on the basis of these documents, and that in respect of bill of entry there is no endorsement of the customs officers, as per the requirement of the Board’s Circular No. 179/13/96-CX., dated 29-2-96 and, hence, the bill of entry on the basis of which the credit of Rs. 1,07,116/- has been taken was not even valid document for availment of Cenvat credit either by Okhla unit or by Faridabad unit. They also contended that the appellant have suppressed the relevant information from the department with regard to the availment of the above Cenvat credit and, hence, the longer limitation period under proviso to Section 11A(1) has been correctly invoked and penalty under Section 11AC has been correctly invoked.

REASONING OF JUDGEMENT:- Reliance was placed on the judgmentof the Hon’ble Supreme Court in the cases of CCE v. Chemphar Drugs & Liniments reported in 1989 (40) E.L.T. 276 (S.C.) and Padmini Products v. CCE reported in 1989 (43) E.L.T.195 (S.C.), wherein it has been held that mere inaction or failure to furnish some information is not sufficient for invoking extended period under proviso to Section 11A and some positive evidence in this regard must be produced. Further, it was found that the wrong availment of Cenvat credit had been detected in course of audit of the records of the appellant which were produced by them to the auditors at the time of their visit to the factory and so it cannot be held that the appellant suppressed facts to evade payment of duty and so the extended period of limitation was not invokable. Moreover, in respect of credit of alleged wrong Cenvat credit of Rs. 1,18,396/- where the goods meant for Faridabad unit had been wrongly received by Okhla unit and the Okhla unit transferred them to Faridabad unit under endorsed invoice/bill of entry, it is not in dispute that the goods had been received by the Faridabad unit and under the provisions of Cenvat Credit Rules, it was permissible for the Okhla unit to clear the goods, as such, after reversing the Cenvat credit under their invoices. In view of this, there could not be any intention on the part of the appellant to avail wrong Cenvat credit or avail Cenvat credit twice on the basis of the same document. As regards, the Cenvat credit of Rs. 1,09,695/- in respect of capital goods which are alleged to have been used exclusively for manufacture of the goods on job work basis, which were cleared at nil rate of duty is concerned, it was held that since the appellant during that period were regularly filing the ER-1 returns and the fact of clearance of goods without payment of duty under job work challan under Notification No. 214/86-C.E., was known to the department, it is difficult to accept the department’s contention that the relevant information with regard to availment of the capital goods Cenvat credit was deliberately suppressed by the appellant.

DECISION:- The appeal was allowed.

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PJ/ Case Laws/2012-13/1271

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